Corporate Social Responsibility and M&A Uncertainty

49 Pages Posted: 1 Apr 2019

See all articles by Mohamed Arouri

Mohamed Arouri

Université Côte d'Azur

Mathieu Gomes

Université Clermont Auvergne

Kuntara Pukthuanthong

University of Missouri, Columbia

Date Written: March 7, 2019

Abstract

We contribute to the corporate social responsibility (CSR) literature by investigating whether the CSR of acquirers impacts mergers and acquisitions (M&A) completion uncertainty. Using arbitrage spreads following initial acquisition announcements as a measure of deal uncertainty, we document – for an international sample of 726 M&A operations spanning the 2004-2016 period – a negative association between arbitrage spreads and acquirers’ CSR. Specifically, we show arbitrage spreads are reduced by 1.10 percentage points for each standard deviation unit-increase in the acquirer’s CSR score. Findings are qualitatively similar when we focus on individual CSR dimensions (environmental, social, and governance). Our results suggest the CSR of acquirers is an important determinant of the way market participants assess the outcome of M&As worldwide.

Keywords: Corporate Social Responsibility (CSR), Mergers and Acquisitions (M&A), Risk Arbitrage

JEL Classification: G34, M1

Suggested Citation

Arouri, Mohamed and Gomes, Mathieu and Pukthuanthong, Kuntara, Corporate Social Responsibility and M&A Uncertainty (March 7, 2019). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3348198

Mohamed Arouri

Université Côte d'Azur ( email )

France

Mathieu Gomes (Contact Author)

Université Clermont Auvergne ( email )

Clermont-Ferrand
France

Kuntara Pukthuanthong

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

HOME PAGE: https://www.kuntara.net/

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