The valuation effects of corporate social responsibility on mergers and acquisitions: Evidence from U.S. target firms

Kyumin Cho · Seung Hun Han · Hyeong Joon Kim · Sang Soo Kim

34 citations0/0 files storedCorporate Social Responsibility and Environmental Management

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Corporate Social Responsibility Reporting Corporate Finance and Governance Financial Reporting and Valuation Research

Abstract

Abstract This study investigates whether a target firm's corporate social responsibility (CSR) performance creates value for shareholders. Our results indicate that target CSR performance that is stronger than that of the acquirer firm yields higher premiums for target shareholders. In addition, the positive valuation effect of CSR is more pronounced when well‐governed acquirers conduct the takeover. Our evidence is robust to several sensitivity tests. These results imply that favorable market reactions to the target's CSR are due to the market expectation that well‐governed acquirers reward the target's shareholders with a fair CSR value in merger and acquisition (M&A) transactions. Consistent with the stakeholder theory that maximizes stakeholder value, investing in CSR creates value in M&A transactions.

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References

1993Common risk factors in the returns on stocks and bonds 2007Strategy and society: the link between competitive advantage and corporate social responsibility 2001Does Doing Good Always Lead to Doing Better? Consumer Reactions to Corporate Social Responsibility 2010Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting 2013Corporate social responsibility and access to finance 2017Social Capital, Trust, and Firm Performance: The Value of Corporate Social Responsibility during the Financial Crisis 2008What Matters in Corporate Governance?2013The Impact of Corporate Social Responsibility on Firm Value: The Role of Customer Awareness

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