Reputational Concerns in the Market for Corporate Control

61 Pages Posted: 6 Mar 2012 Last revised: 2 Nov 2018

See all articles by Audra L. Boone

Audra L. Boone

Texas Christian University - M.J. Neeley School of Business

Vahap Bülent Uysal

University of Oklahoma

Date Written: July 31, 2018

Abstract

This paper explores whether corporate acquirers consider environmental reputations when planning and structuring takeovers. We find that firms with an environmentally toxic reputation, which have the greatest potential for negative spillovers to their merger partners, have a lower associated probability of being both acquirers and targets. Acquirers are more likely to pair with similar reputation firms and are less likely to acquire firms with lower reputations. Most notably, green firms in our sample never acquire toxic firms. Acquirers that buy firms with differing environmental reputations use a higher percentage of stock in their acquisition offers. We further show that the returns to acquirers are lower when they acquire firms outside of their area. Collectively, these findings suggest that managers account for potential negative spillover effects in acquisition decisions.

Keywords: Reputational capital, mergers and acquisitions, environmental practices, spillover effects

JEL Classification: G34

Suggested Citation

Boone, Audra and Uysal, Vahap B., Reputational Concerns in the Market for Corporate Control (July 31, 2018). AFA 2013 San Diego Meetings Paper. Available at SSRN: https://ssrn.com/abstract=2017277 or http://dx.doi.org/10.2139/ssrn.2017277

Audra Boone (Contact Author)

Texas Christian University - M.J. Neeley School of Business ( email )

Fort Worth, TX 76129
United States

Vahap B. Uysal

University of Oklahoma ( email )

307 West Brooks
Norman, OK 73019-4004
United States
405-325 5672 (Phone)

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