Social Responsibility and Operational Risks in Merger and Acquisition Decisions
34 Pages Posted: 21 Feb 2020
Date Written: January 25, 2020
We study how corporate social responsibility (CSR) impacts a manufacturer’s decisions on mergers and acquisitions (M&As). M&As are accompanied by significant changes in organizations and operational systems, and the decision of M&A may be affected by potential challenges and operational risks in post-M&A integration. CSR may bring a broad set of corporate values to address these challenges. To empirically investigate the role of CSR in M&A decisions, we estimate bootstrap-based conditional logit models using secondary data from 2005-2016. We find that a firm’s CSR score is positively associated with its acquiring possibility as CSR promotes a long-term perspective on value-creation, facilitates integration across organizations, and buffers against risks of failures. We also find such positive impact can be extended to cases when firms are lean in operations and when the purposes of M&As involve innovation or emerging market expansion. Our extended analyses further show that the beneficial role of CSR is primarily driven by the corporate governance dimension, instead of social or environmental dimension. Theoretical and managerial insights are also discussed.
Keywords: mergers and acquisitions, corporate social responsibility, lean operations, innovation, emerging markets, bootstrap-based conditional logit estimation
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