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Corporate social responsibility and stakeholder value maximization: Evidence from mergers

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  • Deng, Xin
  • Kang, Jun-koo
  • Low, Buen Sin
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    Abstract

    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.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 110 (2013)
    Issue (Month): 1 ()
    Pages: 87-109

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    Handle: RePEc:eee:jfinec:v:110:y:2013:i:1:p:87-109

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Corporate social responsibility (CSR); Stakeholder theory; Nexus of contract; Merger; Announcement return;

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    Cited by:
    1. Grundel, S. & Borm, P.E.M. & Hamers, H.J.M., 2013. "Resource Allocation Problems with Concave Reward Functions," Discussion Paper 2013-070, Tilburg University, Center for Economic Research.
    2. Liang, H. & Renneboog, L.D.R., 2013. "The Foundations of Corporate Social Responsibility," Discussion Paper 2013-071, Tilburg University, Center for Economic Research.

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