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Purpose This paper aims to investigate the influence of environmental, social and governance (ESG) on mergers and acquisitions (M&A) decisions/activities and organisational performance in UK – financial and non-financial firms over the period (2012–2022). Design/methodology/approach The theoretical lenses underpinning this study are rooted in stakeholder theory and resource-based theory. The empirical analysis is based on a sample of financial and non-financial firms selected from FTSE ALL-listed companies over the period (2012–2022). Findings Findings of this study reveal that ESG score has a statistically significant impact on both financial and non-financial firms. An increase in firm ESG performance significantly increases the likelihood of M&A. The results reveal that the impact of ESG on firm financial performance is negative and significant, but this is not the case for non-financial firms where the impact despite being positive is insignificant. Research limitations/implications This research was conducted using data from firms within the UK context. Future research may adopt or adapt the research questions in different context and settings. Future studies may adopt a case study approach or survey-based questionnaires or employ various theoretical lenses. Practical implications Findings of this study have managerial and theoretical implications. Integrating ESG into operational and strategic organisational activities enhances attractiveness to potential bidders and contributes to sustainable financial performance because acquiring targets with high ESG performance can have a positive effect on the acquirer’s post-merger market value, thereby strongly confirming the use of ESG as a value-enhancing strategy to promote corporate external growth. Originality/value Our findings add to the extant literature, a recent empirical evidence that, to the best of our knowledge, our this study is among the first to examine the influence of ESG on M&A and firm performance through comparison between the financial and non-financial sectors.
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