The Effect Of Buyout Deal On The Firm ESG Commitment

Fidèle Balume (), Jean-François Gajewski () and Tao-Hsien Dolly King ()
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Fidèle Balume: MAGELLAN - Laboratoire de Recherche Magellan - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon - Institut d'Administration des Entreprises (IAE) - Lyon, Iaelyon - Iaelyon School of Management - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon
Jean-François Gajewski: MAGELLAN - Laboratoire de Recherche Magellan - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon - Institut d'Administration des Entreprises (IAE) - Lyon, Iaelyon - Iaelyon School of Management - UJML - Université Jean Moulin - Lyon 3 - Université de Lyon
Tao-Hsien Dolly King: The University of North Carolina at Charlotte

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Abstract: We study the effect of the buyout financing on the company's ESG commitment. Our analysis covers 182 buyouts and 182 comparable US companies between 2010 and 2023. We find that companies selected for a buyout have a significantly higher ESG commitment prior to the LBO than in the post-buyout period. The lower level of ESG commitment is explained by a weakened governance score. In addition, we observe a deterioration in the ESG commitment of acquired companies relative to their peers in the post-buyout period. Our multivariate analysis confirms this result, demonstrating that buyout financing is negatively related to the gap between LBOs and their comparables, and is associated with a negative variation in the annual variation of the ESG score. A more in-depth analysis of the governance pillar shows that CEO power is a strong explanation for the decline in the governance pillar score.

Keywords: LBO; Buyout; Leverage; ESG commitment (search for similar items in EconPapers)
Date: 2024-05-27
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Published in 40th International Conference of the French Finance Association, AFFI, May 2024, Lille, France

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04594981

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