In this article, we investigate whether there is a trade-off between corporate social responsibility (CSR) and mergers and acquisitions (M&A) investments. Consistent with conflict resolution view of stakeholder theory, our results document a negative relationship between CSR scores and M&A activity. We further show that the tendency of CSR firms’ low engagements in M&A investmen ts is valid only for firms with no slack. We also find that firms choosing to trade off pay a lower bid premium to targets to create value for acquiring shareholders. These findings are robust to several alternative proxies and endogeneity tests.
AngelidisJIbrahimN (2004) An exploratory study of the impact of degree of religiousness upon an individual’s corporate social responsiveness orientation. Journal of Business Ethics51: 119–128.
2.
ArouriMGomesMPukthuanthongK (2019) Corporate social responsibility and M&A uncertainty. Journal of Corporate Finance56: 176–198.
3.
BarberBMLyonJD (1997) Detecting long-run abnormal stock returns: The empirical power and specification of test statistics. Journal of Financial Economics43: 341–372.
4.
BecchettiLCicirettiRGiovannelliA (2013) Corporate social responsibility and earnings forecasting unbiasedness. Journal of Banking & Finance37: 3654–3668.
5.
BenlemlihMBitarM (2018) Corporate social responsibility and investment efficiency. Journal of Business Ethics148: 647–671.
6.
BouslahKKryzanowskiLM’ZaliB (2013) The impact of the dimensions of social performance on firm risk. Journal of Banking & Finance37: 1258–1273.
7.
ByunSKOhJM (2018) Local corporate social responsibility, media coverage, and shareholder value. Journal of Banking & Finance87: 68–86.
8.
ChatterjiAKLevineDIToffelMW (2009) How well do social ratings actually measure corporate social responsibility?Journal of Economics & Management Strategy18: 125–169.
9.
ChengBIoannouISerafeimG (2014) Corporate social responsibility and access to finance. Strategic Management Journal35: 1–23.
10.
ChhaochhariaVKumarANiessen-RuenziA (2012) Local investors and corporate governance. Journal of Accounting and Economics54: 42–67.
11.
CornellBShapiroAC (1987) Corporate stakeholders and corporate finance. Financial Management16: 5–14.
12.
Demirgüç-KuntAMaksimovicV (1998) Law, finance, and firm growth. Journal of Finance53: 2107–2137.
13.
DengXKangJKLowBS (2013) Corporate social responsibility and stakeholder value maximization: Evidence from mergers. Journal of Financial Economics110: 87–109.
14.
DessaintOGolubovAVolpinP (2017) Employment protection and takeovers. Journal of Financial Economics125: 369–388.
15.
DhaliwalDSLiOZTsangA, et al. (2011) Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting. Accounting Review86: 59–100.
16.
Di GiuliAKostovetskyL (2014) Are red or blue companies more likely to go green? Politics and corporate social responsibility. Journal of Financial Economics111: 158–180.
17.
EdmansA (2011) Does the stock market fully value intangibles? Employee satisfaction and equity prices. Journal of Financial Economics101: 621–640.
18.
El GhoulSGuedhamiOKwokCC, et al. (2011) Does corporate social responsibility affect the cost of capital?Journal of Banking & Finance35: 2388–2406.
19.
FamaEFFrenchKR (1997) Industry costs of equity. Journal of Financial Economics43: 153–193.
20.
FatemiAFooladiITehranianH (2015) Valuation effects of corporate social responsibility. Journal of Banking & Finance59: 182–192.
21.
FerrellALiangHRenneboogL (2016) Socially responsible firms. Journal of Financial Economics122: 585–606.
22.
FreemanRE (1984) Stakeholder Management: A Strategic Approach. New York: Pitman.
GalemaRPlantingaAScholtensB (2008) The stocks at stake: Return and risk in socially responsible investment. Journal of Banking & Finance32: 2646–2654.
25.
GaoLZhangJH (2015) Firms’ earnings smoothing, corporate social responsibility, and valuation. Journal of Corporate Finance32: 108–127.
26.
GiroudXMuellerHM (2010) Does corporate governance matter in competitive industries?Journal of Financial Economics95: 312–331.
27.
GravesSBWaddockSA (1994) Institutional owners and corporate social performance. Academy of Management Journal37: 1034–1046.
28.
GuptaKKrishnamurtiC (2018) Does corporate social responsibility engagement benefit distressed firms? The role of moral and exchange capital. Pacific-Basin Finance Journal50: 249–262.
29.
HuangJJainBAKiniO (2019) Industry tournament incentives and the product-market benefits of corporate liquidity. Journal of Financial and Quantitative Analysis54: 829–876.
30.
Humphery-JennerMLPowellRG (2011) Firm size, takeover profitability, and the effectiveness of the market for corporate control: Does the absence of anti-takeover provisions make a difference?Journal of Corporate Finance17: 418–437.
31.
HuseynovFKlammBK (2012) Tax avoidance, tax management and corporate social responsibility. Journal of Corporate Finance18: 804–827.
32.
HustedBWJamaliDSaffarW (2016) Near and dear? The role of location in CSR engagement. Strategic Management Journal37: 2050–2070.
33.
JensenMCMecklingWH (1976) Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics3: 305–360.
34.
JiaoY (2010) Stakeholder welfare and firm value. Journal of Banking & Finance34: 2549–2561.
35.
KimYStatmanM (2012) Do corporations invest enough in environmental responsibility?Journal of Business Ethics105: 115–129.
36.
KimYParkMSWierB (2012) Is earnings quality associated with corporate social responsibility?The Accounting Review87: 761–796.
KrishnamurtiCShamsSPensieroD, et al. (2019) Socially responsible firms and mergers and acquisitions performance: Australian evidence. Pacific-Basin Finance Journal57: 101193.
39.
KrügerP (2015) Corporate goodness and shareholder wealth. Journal of Financial Economics115: 304–329.
40.
LeviMLiKZhangF (2014) Director gender and mergers and acquisitions. Journal of Corporate Finance28: 185–200.
41.
McWilliamsASiegelDSWrightPM (2006) Corporate social responsibility: Strategic implications. Journal of Management Studies43: 1–18.
42.
MaksimovicVPhillipsGPrabhalaNR (2011) Post-merger restructuring and the boundaries of the firm. Journal of Financial Economics102: 317–343.
43.
MargolisJDWalshJP (2001) People and Profits: The Search for a Link between a Company’s Social and Financial Performance. Hove: Psychology Press.
44.
MasulisRWWangCXieF (2007) Corporate governance and acquirer returns. Journal of Finance62: 1851–1889.
45.
MoellerSSchlingemannFStulzR (2004) Firm size and the gains from acquisitions. Journal of Financial Economics73: 201–228.
46.
OfficerMS (2007) The price of corporate liquidity: Acquisition discounts for unlisted targets. Journal of Financial Economics83: 571–598.
47.
ParentePMSilvaJS (2012) A cautionary note on tests of overidentifying restrictions. Economics Letters115: 314–317.
48.
PavaMLKrauszJ (1996) The association between corporate social-responsibility and financial performance: The paradox of social cost. Journal of Business Ethics15: 321–357.
49.
PetersRHTaylorLA (2017) Intangible capital and the investment-q relation. Journal of Financial Economics123: 251–272.
50.
PrestonLEO’BannonDP (1997) The corporate social-financial performance relationship: A typology and analysis. Business & Society36: 419–429.
51.
RobertsMRWhitedTM (2013) Endogeneity in empirical corporate finance. In: ConstantinidesGMHarrisMStulzRM (eds) Handbook of the Economics of Finance, Vol. 2. Amsterdam, The Netherlands: Elsevier, pp. 493–572.
52.
RomanRMHayiborSAgleBR (1999) The relationship between social and financial performance: Repainting a portrait. Business & Society38: 109–125.
53.
ServaesHTamayoA (2013) The impact of corporate social responsibility on firm value: The role of customer awareness. Management Science59: 1045–1061.
54.
ShenRTangYChenG (2014) When the role fits: How firm status differentials affect corporate takeovers. Strategic Management Journal35: 2012–2030.
55.
SpicerBH (1978) Investors, corporate social performance and information disclosure: An empirical study. Accounting Review53: 94–111.
