Socially Responsible Bidding Firms and Acquisitions Decisions: Australian Evidence
34 Pages Posted: 25 Jan 2018
Date Written: January 24, 2018
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
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