The Value of CSR in Acquisitions: Evidence from China

Kun Li, Chaohua He, Wassim Dbouk and Ke Zhao
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Kun Li: Business School, Beijing Normal University, Beijing 100875, China
Chaohua He: School of International Trade and Economics, University of International Business and Economics, Beijing 100029, China
Wassim Dbouk: Suliman S. Olayan School of Business, American University of Beirut, Beirut 1107 2020, Lebanon
Ke Zhao: Graduate School, University of International Business and Economics, Beijing 100029, China

Sustainability, 2021, vol. 13, issue 7, 1-21

Abstract: In this paper, we aim to test whether and how corporate social responsibility (CSR) is valued in merger and acquisition (M&A) transactions. Employing multiple regression and logistic regression methods to examine the CSR in China’s domestic M&A market from 2007 to 2018, we reveal the following: (i) acquisition targets with higher social performance can attain higher acquisition valuation, especially when the acquirers are also socially responsible; (ii) high-CSR acquirers are inclined to choose equity payments, while high-CSR acquisition targets prefer to be paid in cash; (iii) high CSR performance boosts M&A success rate. The findings are robust, due to adopting two-stage least squares method to tackle endogeneity, substituting variable measures and data sources, and winsorizing variables at high levels to eliminate outliers. The value of CSR in M&As possibly results from the role of CSR in reducing information frictions, agency concerns, and corporate risks and is primarily associated with activities which are friendly to suppliers, customers, shareholders, public welfare, and natural environment, as well as being higher in developed regions and irrelevant to corporate ownership and nature. The study is of vital significance to the valuation and decision making in M&A deals.

Keywords: corporate social responsibility; acquirer CSR; target CSR; M&A valuation; M&A success rate; payment method (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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