ESG incidents and M&A decisions

Hongyu Cai and Qiyun Deng

Finance Research Letters, 2025, vol. 75, issue C

Abstract: We investigate how environmental, social, and governance (ESG) incidents influence mergers and acquisitions (M&A) decisions using a novel RepRisk dataset integrating ESG incidents with M&A transactions. Employing probit and Poirier bivariate probit models to address partial observability issues, we find that ESG incidents, especially environmental and social issues, significantly reduce merger success probability and are associated with lower merger premiums. Both target and acquirer firms experiencing environmental or social incidents face decreased merger success likelihood and lower premiums.

Keywords: ESG incidents; Mergers and acquisitions; Merger premium; Corporate finance (search for similar items in EconPapers)
JEL-codes: G34 M14 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325000893

DOI: 10.1016/j.frl.2025.106824

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