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Corporate social responsibility and M&A uncertainty

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  • Arouri, Mohamed
  • Gomes, Mathieu
  • Pukthuanthong, Kuntara

Abstract

We contribute to the corporate social responsibility (CSR) literature by investigating whether the CSR of acquirers impacts mergers and acquisitions (M&A) completion uncertainty. Using arbitrage spreads following initial acquisition announcements as a measure of deal uncertainty, we document –for an international sample of 726 M&A operations spanning the 2004–2016 period– a negative association between arbitrage spreads and acquirers' CSR. Specifically, we show arbitrage spreads are reduced by 1.10 percentage points for each standard deviation unit-increase in the acquirer's CSR score. Findings are qualitatively similar when we focus on individual CSR dimensions (environmental, social, and governance). Our results suggest the CSR of acquirers is an important determinant of the way market participants assess the outcome of M&As worldwide.

Suggested Citation

  • Arouri, Mohamed & Gomes, Mathieu & Pukthuanthong, Kuntara, 2019. "Corporate social responsibility and M&A uncertainty," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 176-198.
  • Handle: RePEc:eee:corfin:v:56:y:2019:i:c:p:176-198
    DOI: 10.1016/j.jcorpfin.2019.02.002
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    More about this item

    Keywords

    Corporate social responsibility (CSR); Mergers and acquisitions (M&a); Risk arbitrage;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration

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