Corporate Social Responsibility and Stakeholder Value Maximization: Evidence from Mergers

51 Pages Posted: 28 May 2012 Last revised: 5 Feb 2014

See all articles by Xin Deng

Xin Deng

Nanyang Technological University

Jun-Koo Kang

Nanyang Technological University (NTU) - Nanyang Business School

Buen Sin Low

Nanyang Technological University (NTU) - Division of Banking & Finance

Date Written: March 1, 2013

Abstract

Using a large sample of mergers in the U.S., we examine whether corporate social responsibility (CSR) creates value for acquiring firms’ shareholders. We find that compared to low CSR acquirers, high CSR acquirers realize higher merger announcement returns, higher announcement returns on the value-weighted portfolio of the acquirer and the target, and larger increases in post-merger long-term operating performance. They also realize positive long-term stock returns, suggesting that the market does not fully value the benefits of CSR immediately. In addition, we find that mergers by high CSR acquirers take less time to complete and are less likely to fail than mergers by low CSR acquirers. These results suggest that acquirers’ social performance is an important determinant of merger performance and the probability of its completion, and support the stakeholder value maximization view of stakeholder theory.

Keywords: Corporate Social Responsibility (CSR), Stakeholder Theory, Agency Problem, Nexus of Contract, Merger, Announcement Return

JEL Classification: G34, M1

Suggested Citation

Deng, Xin and Kang, Jun-Koo and Low, Buen Sin, Corporate Social Responsibility and Stakeholder Value Maximization: Evidence from Mergers (March 1, 2013). Available at SSRN: https://ssrn.com/abstract=2067416 or http://dx.doi.org/10.2139/ssrn.2067416

Xin Deng (Contact Author)

Nanyang Technological University ( email )

S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore

Jun-Koo Kang

Nanyang Technological University (NTU) - Nanyang Business School ( email )

Nanyang Avenue, Block S3-01b-54
Singapore, 639798
Singapore
(+65) 6790-5662 (Phone)
(+65) 6791-3697 (Fax)

HOME PAGE: http://www.nbs.ntu.edu.sg/nbs_corporate/divisions/bnf/index.asp

Buen Sin Low

Nanyang Technological University (NTU) - Division of Banking & Finance ( email )

S3-B1B-76 Nanyang Avenue
Singapore, 639798
Singapore

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