Too much of a good thing? Corporate social responsibility and the takeover market

Fairhurst, Douglas (dj) and Daniel T. Greene

Journal of Corporate Finance, 2022, vol. 73, issue C

Abstract: We examine the relation between corporate social responsibility (CSR) and firm value using the takeover market as an empirical setting. Firms with high or low CSR scores experience a greater likelihood of takeover and lower wealth gains in takeovers relative to firms with moderate policies. These findings indicate that the takeover market acts as a corrective mechanism for firms that over- or under-invest in CSR. Our results are robust to controlling for governance and alternative motivations for mergers and are evident in sub-samples where CSR is arguably more important. Our findings are not driven by poor management of target firms. Overall, the evidence suggests that CSR generally benefits shareholders, however, very high or low CSR scores appear to be harmful.

Keywords: Corporate social responsibility; Mergers and acquisitions; Stakeholder theory (search for similar items in EconPapers)
JEL-codes: G32 G34 M14 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:73:y:2022:i:c:s0929119922000153

DOI: 10.1016/j.jcorpfin.2022.102172

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