Socially Responsible Bidding Firms and Acquisitions Decisions: Australian Evidence

34 Pages Posted: 25 Jan 2018

See all articles by Chandrasekhar Krishnamurti

Chandrasekhar Krishnamurti

University of South Australia

Syed Shams

University of Southern Queensland

Domenico Pensiero

University of Southern Queensland

Eswaran Velayutham

University of Southern Queensland

Date Written: January 24, 2018

Abstract

This paper extends our knowledge on acquisition decisions by examining whether a firm’s corporate social responsibility (CSR) activities influence the choice and Merger and Acquisition (M&A) performance. Our empirical results reveal several new insights. First, we find that targets with CSR activities are more likely to be acquired by CSR oriented bidder firms. This finding is consistent with the idea that managers of Australian firms that undertake CSR activities are also likely to acquire a target firm with CSR practices. We also investigate the acquisition decisions and performance of socially responsible bidding firms. We find that the announcement period abnormal return is positive and significant when CSR-oriented bidding firms announce an acquisition decision in the market. Consistently, we show that socially responsible firms are more likely to pay a lower bid premium when they pay for acquisitions. Finally, we show that CSR firms make investment decisions consistent with shareholders’ wealth maximization objectives suggesting that CSR-oriented firms are better aligned with the other stakeholders of the firm. Our results are robust to a number of alternative proxies and sensitivity tests.

Keywords: corporate social responsibility, mergers and acquisitions, abnormal returns

JEL Classification: G34

Suggested Citation

Krishnamurti, Chandrasekhar and Shams, Syed and Pensiero, Domenico and Velayutham, Eswaran, Socially Responsible Bidding Firms and Acquisitions Decisions: Australian Evidence (January 24, 2018). Available at SSRN: https://ssrn.com/abstract=3109014 or http://dx.doi.org/10.2139/ssrn.3109014

Chandrasekhar Krishnamurti (Contact Author)

University of South Australia ( email )

37-44 North Terrace, City West Campus
Adelaide, South Australia 5001
Australia

Syed Shams

University of Southern Queensland ( email )

Sprinfield
Springfield
Springfield, Queensland 4300
Australia
+61734704551 (Phone)

Domenico Pensiero

University of Southern Queensland ( email )

P.O.Box 238 Darling Heights
Toowoomba, Queensland 4350
Australia

Eswaran Velayutham

University of Southern Queensland ( email )

P.O.Box 238 Darling Heights
Toowoomba, Queensland 4350
Australia

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