Impact of target firm’s social performance on acquisition premiums

Mahfuja Malik and Md Al Mamun

Journal of Contemporary Accounting and Economics, 2024, vol. 20, issue 2

Abstract: This study investigates whether a target firm’s corporate social responsibility (CSR) influences the acquisition premium paid by an acquirer. Using the US public mergers and acquisitions (M&A) deals, this study finds that acquisition premium increases as targets’ perceived CSR quality increases, an effect incremental to previously documented drivers of such premiums. Additional findings reveal that the positive association between targets’ CSR quality and acquisition premiums is stronger for large targets and acquirers with high CSR performance. The study also documents that targets’ environmental performance has the strongest effects on acquisition premiums compared to other dimensions of CSR such as community, employees, diversity, or product. This study contributes to the literature by documenting the value of CSR in an unconventional manner using evidence from the M&A market. The findings are robust after controlling for the target-specific, acquirer-specific, deal-specific, and macro-economic variables and by using different proxies for CSR and acquisition premiums.

Keywords: Corporate social responsibility; Merger and acquisition; Acquisition premiums (search for similar items in EconPapers)
JEL-codes: G34 M14 Q56 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:20:y:2024:i:2:s1815566924000171

DOI: 10.1016/j.jcae.2024.100417

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