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The valuation effects of corporate social responsibility on mergers and acquisitions: Evidence from U.S. target firms
Author(s) -
Cho Kyumin,
Han Seung Hun,
Kim Hyeong Joon,
Kim Sangsoo
Publication year - 2020
Publication title -
corporate social responsibility and environmental management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.519
H-Index - 73
eISSN - 1535-3966
pISSN - 1535-3958
DOI - 10.1002/csr.2055
Subject(s) - corporate social responsibility , shareholder , business , valuation (finance) , stakeholder , mergers and acquisitions , enterprise value , market value , stakeholder theory , accounting , valuation effects , value (mathematics) , shareholder value , monetary economics , industrial organization , corporate governance , finance , economics , public relations , management , machine learning , political science , computer science
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.