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Review of Managerial Science

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15-05-2021 | Original Paper

The effect of target’s CSR performance on M&A deal premiums: a case for service firms

Authors: Ozgur Ozdemir, Fatemeh Binesh, Ezgi Erkmen

Published in: Review of Managerial Science | Issue 4/2022

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Abstract

In this study, we examine the effect of corporate social responsibility (CSR) performance on mergers and acquisitions (M&A) deal premiums. More precisely, we explore the value enhancing role of target’s pre-acquisition CSR performance at an M&A transaction by focusing on the deal premiums. We also examine whether firms in the service industries experience a higher deal premium due to their CSR performance compared to firms in other industries. We use several data sources (i.e. MSCI ESG KLD STATS, FactSet, Compustat and CRSP) to compile the final sample of the study, 277 completed acquisitions over the period 1996–2018. We use ordinary least square regression to estimate empirical models and find that target’s pre-acquisition CSR performance is positively related to deal premium. Moreover, the moderation analysis indicates that the positive effect of targets’ CSR performance on deal premium is more profound for firms operating in the service industries than those in non-service industries. The findings of the study is robust to different operationalizations of deal premium. Additionally, examining the positive and negative CSR attributes separately, we reveal consistent evidence with the prediction that positive CSR involvement of target firms increases the deal premium.

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Title: The effect of target’s CSR performance on M&A deal premiums: a case for service firms
Authors: Ozgur Ozdemir
Fatemeh Binesh
Ezgi Erkmen
Publication date: 15-05-2021
Publisher: Springer Berlin Heidelberg
Published in: Review of Managerial Science / Issue 4/2022
Print ISSN: 1863-6683
Electronic ISSN: 1863-6691
DOI: https://doi.org/10.1007/s11846-021-00471-y

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