 The cost of corporate social irresponsibility for acquirersReagan D'Souza, Ho, Choy Yeing (Chloe) and Joey W. Yang Journal of Banking & Finance, 2024, vol. 162, issue C Abstract: Few studies have examined the reputational damage of environmental and social (E&S) scandals ex-post. Using an international sample of mergers and acquisitions (M&A) across 18 countries, we examine whether heightened E&S risks arising from acquirers’ E&S incidents affect the cost of acquisition. We find that the severity of the incident increases acquisition premium and this effect is explained by incident acquirers compensating target shareholders for heightened reputation risks, rather than seeking to repair their reputation through the acquisition. At the country level, incident acquirers in countries with stronger E&S standards and policies also experience higher premium. Further analysis shows that E&S incidents reduce shareholder value upon the announcement of an M&A and increase the time taken for M&A completion. Firms are less likely to make acquisitions after experiencing an E&S incident, but this decision depends on the cost of delay. Finally, we show that the adverse impact on acquisitions dissipates after six months. Keywords: Mergers and acquisitions; Corporate social irresponsibility; Reputational risk; Environmental scandal; Social scandal (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:162:y:2024:i:c:s0378426624000529 DOI: 10.1016/j.jbankfin.2024.107132 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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