Taming the Storm: The Curious Case of Geopolitical Risk, Corporate Social Responsibility and M&A Failure

Sulagna Bhattacharya

No hztnj_v1, SocArXiv from Center for Open Science

Abstract: Geopolitical risk has emerged as a persistent feature of the global business environment, yet its impacts on domestic mergers and acquisitions (M&A) remain underexplored, particularly in emerging economies with distinctive institutional contexts. This study examines how geopolitical risk influences M&A deal failure in India and whether acquirers’ corporate social responsibility (CSR) moderates this relationship under the country’s mandatory CSR regime. Using a sample of 377 domestic M&A deals announced between 2015–16 and 2019–20, the analysis reveals a counterintuitive pattern: higher geopolitical risk is associated with a lower likelihood of deal failure, suggesting that firms pursue domestic consolidation as a defensive hedge against external volatility. While acquirers’ CSR performance independently reduces the probability of deal failure, its interaction with high geopolitical risk increases the likelihood of failure. It indicates that strong CSR commitments may constrain financial flexibility during uncertain times, thereby heightening deal vulnerability. These results remain robust across alternative model specifications, sub-samples, and disaggregated geopolitical risk measures. By integrating geopolitical risk with a legally enforced CSR spending regime, this study provides one of the first empirical demonstrations of how macro-political turbulence and regulatory social responsibility jointly shape corporate M&A outcomes in emerging markets. These findings re-conceptualize CSR as a potential financial constraint under regulation and advance the understanding of firm behavior at the intersection of risk, responsibility, and regulation.

Date: 2025-11-16
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:hztnj_v1

DOI: 10.31219/osf.io/hztnj_v1

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