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ESG incidents and M&A decisions

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  • Cai, Hongyu
  • Deng, Qiyun

Abstract

We investigate how environmental, social, and governance (ESG) incidents influence mergers and acquisitions (M&A) decisions using a novel RepRisk dataset integrating ESG incidents with M&A transactions. Employing probit and Poirier bivariate probit models to address partial observability issues, we find that ESG incidents, especially environmental and social issues, significantly reduce merger success probability and are associated with lower merger premiums. Both target and acquirer firms experiencing environmental or social incidents face decreased merger success likelihood and lower premiums.

Suggested Citation

  • Cai, Hongyu & Deng, Qiyun, 2025. "ESG incidents and M&A decisions," Finance Research Letters, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325000893
    DOI: 10.1016/j.frl.2025.106824
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    References listed on IDEAS

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    More about this item

    Keywords

    ESG incidents; Mergers and acquisitions; Merger premium; Corporate finance;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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