Pay for Being Responsible: The Effect of Target Firm’s Corporate Social Responsibility on Cross-Border Acquisition Premiums

Qiao, Li; Wu, Jianfeng

doi:10.3390/su11051291

Cited by 20 publications

(16 citation statements)

References 82 publications

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“…The results also show that firms that acquired SRI-aware targets managed to improve their social and environmental performance, suggesting the ability of acquirers to learn from the targets’ SRI activities and practices. Other studies investigate the effects of ESG corporate performance on various M&A outcomes such as acquisition premiums (Gomes and Marsat, 2018; Qiao and Wu, 2019), target selection and screening process (Gomes, 2019), target valuation (Chen and Gavious, 2015), deal-related uncertainty (Arouri et al , 2019), the level of investment in mergers (Krishnamurti et al , 2020), the potential for a firm to become either a target or an acquirer (Boone and Uysal, 2020) and the post-merger market valuation (Tampakoudis and Anagnostopoulou, 2020).…”

Section: Theoretical Framework and Literature Reviewmentioning

confidence: 99%

The effect of ESG on value creation from mergers and acquisitions. What changed during the COVID-19 pandemic?

Tampakoudis

Noulas

Kiosses

et al. 2021

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Purpose The purpose of this study is to investigate the relationship between environmental, social and governance (ESG) performance and shareholder wealth in the context of mergers and acquisitions (M&As) before and during the coronavirus (COVID-19) pandemic. Design/methodology/approach This paper uses a sample of 889 completed M&As announced by US firms between 1 January 2018 and 31 July 2020. Announcement abnormal returns are estimated using an event study methodology and the relation of ESG performance to shareholder value creation is tested with univariate and multivariate cross-sectional regressions. Findings This study provides evidence for a significant negative value effect of ESG performance for the shareholders of acquiring firms during the entire sample period. The negative effect appears to be stronger, as the onset of the COVID-19 crisis. This suggests that, during the pandemic-driven economic turmoil, the costs of sustainability activities outweigh any possible gains, providing evidence in support of the overinvestment hypothesis. Research limitations/implications The results of the study have important implications for firms, investors and policymakers. Firms should be more cautious with regard to extensive investments in ESG activities, particularly during economic turmoil. For shareholders, the results suggest that ESG engagement is not a resilience factor in an exogenous shock such as the COVID-19 pandemic. In terms of policymaking, the sustainability disclosure framework should remain voluntary allowing firms to report material ESG-related issues. The main limitation of the study is related to data availability regarding ESG performance. Originality/value To the best of the knowledge, this is the first study that investigates the effect of ESG performance on shareholder value in the market for corporate control before and during the COVID-19 pandemic.

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Section: Theoretical Framework and Literature Reviewmentioning

confidence: 99%

The effect of ESG on value creation from mergers and acquisitions. What changed during the COVID-19 pandemic?

Tampakoudis

Noulas

Kiosses

et al. 2021

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“…this study with research on acquisition price levels and premia would reveal whether the value of CSR is actually reflected in the prices paid for targets with superior CSR (Gomes & Marsat, 2018, Qiao & Wu, 2019. Furthermore, observing the long-term development of an acquirer's CSR performance post-acquisition could reveal whether acquirers are in fact able to improve their own CSR with CSR resources obtained through acquiring a superior CSR target as indicated by Aktas et al (2011).…”

Section: Limitations Of This Study and Avenues For Future Researchmentioning

confidence: 93%

The influence of target CSR performance on acquirer acquisition announcement returns

Gabler

2021

Proceedings

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We examine the influence of a target's CSR performance on acquirer acquisition announcement returns. We argue that acquirers face lower information asymmetries and less opportunistic behavior during the acquisition process as well as post-acquisition access to valuable resources when targeting a company with superior CSR status, resulting in higher acquirer acquisition announcement returns. We furthermore identify the acquirer's own CSR as well as the regulatory focus of its CEO as contingency factors moderating the target CSR-acquirer performance relationship. We find empirical support for our hypotheses in a sample of 232 acquisitions announced by public US companies between 2003 and 2013.

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“…The cultural–cognitive institutional distance was determined by taking the difference between the cultural dimensions of merging firms’ countries of origin. To measure cultural–cognitive institutional distance, we followed Qiao and Wu (2019). We used a composite measure of six factors of Hofstede’s cultural dimension: power distance, uncertainty avoidance, individualism vs collectivism, masculinity vs femininity, long-term orientation and indulgence vs restraint.…”

Section: Methodsmentioning

confidence: 99%

Linking ownership acquired in Chinese firms to post-acquisition innovation performance: role of institutional distance

Hanif

Babar³

2021

CMS

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Purpose The primary purpose of this study is to explore the impact of acquired ownership in Chinese target firm on the innovation performance of developed economies (DE) acquiring firms. Furthermore, the study aims to empirically investigate the moderating influence of institutional distance between two parties’ home countries. Design/methodology/approach For the empirical investigation of the hypotheses, the authors identified cross-border technological acquisitions from the Securities Data Company between 1995 and 2015. A hierarchical negative binomial regression technique was used to analyze 177 technological acquisitions completed by DE acquiring firms in China. Findings Analysis of technological acquisition deals confirmed that acquired ownership undertaken in the Chinese target firms increases the DE acquiring firms’ post-acquisition innovation performance. The authors found that DE acquiring firms underperform in innovation in institutionally distant host countries. Originality/value This study contributes to the international business literature by explaining the importance of acquired ownership undertaken in the Chinese target firms for the DE acquiring firm’s innovation performance. Second, institutional theory defines how institutional uncertainty in terms of distance modifies the positive impact of acquired ownership on acquiring firm’s innovation performance.

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Pay for Being Responsible: The Effect of Target Firm’s Corporate Social Responsibility on Cross-Border Acquisition Premiums

Cited by 20 publications

References 82 publications

The effect of ESG on value creation from mergers and acquisitions. What changed during the COVID-19 pandemic?

The effect of ESG on value creation from mergers and acquisitions. What changed during the COVID-19 pandemic?

The influence of target CSR performance on acquirer acquisition announcement returns

Linking ownership acquired in Chinese firms to post-acquisition innovation performance: role of institutional distance

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