Why Chinese Financial Market Investors Do Not Care about Corporate Social Responsibility: Evidence from Mergers and Acquisitions

We used the corporate social responsibility (CSR) data from Hexun Finance to analyze the three channels of market investor evaluation in the process of Chinese listed companies’ mergers and acquisitions (M&A). We found that: (1) because many CSR behaviors of Chinese listed companies are passive, driven by the environment, government, and regulatory authority, rather than proactive CSR for the long-term interests of the company, Chinese market investors are not concerned with the CSR performance of acquirers before the merger; (2) because passive CSR behavior cannot change the system risk and heterogeneity risk of the acquirers, CSR has no effect on the investor evaluation at the acquirer merger; (3) passive CSR can be used to evaluate public opinion, but CSR cannot change the market concerns of investors because investors only consider the systemic risks and heterogeneity rather than the social media evaluation of the company when pricing; and (4) with further study of the integration effect of CSR after M&A, we found that CSR does not reduce the M&A premium, only increases the return on asset (ROA) of the company within one year after M&A, and does not improve the company’s ROA for a long time. Our conclusions help explain why Chinese financial market investors are not concerned with the CSR performance of the M&A party prior to M&A.