Corporate social responsibility and stakeholder value maximization: Evidence from mergers

• Published in: Journal of financial economics 2013-10, Vol.110 (1), p.87-109
• Main Authors: Deng, Xin, Kang, Jun-koo, Low, Buen Sin
• Format: Article
• Language: English
• Subjects: Acquisitions; Acquisitions & mergers; Announcement return; Corporate social responsibility; Corporate social responsibility (CSR); Earnings announcements; Merger; Mergers; Nexus of contract; Portfolio performance; Rates of return; Shareholders wealth; Social responsibility; Stakeholder; Stakeholder theory; Stock returns; Studies; U.S.A
• ISSN: 0304-405X; 1879-2774
• DOI: 10.1016/j.jfineco.2013.04.014

Using a large sample of mergers in the US, we examine whether corporate social responsibility (CSR) creates value for acquiring firms' shareholders. We find that compared with low CSR acquirers, high CSR acquirers realize higher merger announcement returns, higher announcement returns on the value-weighted portfolio of the acquirer and the target, and larger increases in post-merger long-term operating performance. They also realize positive long-term stock returns, suggesting that the market does not fully value the benefits of CSR immediately. In addition, we find that mergers by high CSR acquirers take less time to complete and are less likely to fail than mergers by low CSR acquirers. These results suggest that acquirers' social performance is an important determinant of merger performance and the probability of its completion, and they support the stakeholder value maximization view of stakeholder theory.