Shareholder value maximization via corporate ESG performance: evidence from mergers and acquisitions in China

Ruichen Ma, Xiaofei Pan and Sandy Suardi

Applied Economics, 2024, vol. 56, issue 58, 8529-8545

Abstract: This study investigates the role of environmental, social, and governance (ESG) performance in shaping shareholder value during mergers and acquisitions (M&A) processes. Drawing on data from Chinese publicly traded companies, we demonstrate that firms with robust ESG performance exhibit a heightened ability to fulfill their commitment to maximizing shareholder value. These findings align with stakeholder theory, which posits that organizations prioritizing ESG considerations are more likely to generate greater returns for their shareholders. Moreover, our analysis reveals that the positive impact of high ESG performance on valuation is magnified in cases where the acquiring firm is either a non-family business or a state-owned enterprise (SOE). Additionally, we find that the influence of corporate ESG performance on value creation becomes more pronounced when the acquiring firm boasts higher levels of transparency and a favourable reputation. This research contributes to the limited body of literature exploring the connection between ESG initiatives and M&A practices, as well as enriches our understanding of firm investment behaviour and value creation, particularly within emerging markets.

Date: 2024
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DOI: 10.1080/00036846.2023.2291095

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