The impact of corporate social responsibility on the performance of mergers and acquisitions: European evidence

Corporate social responsibility (CSR) and its impact on corporate value has been widely debated. Two opposing views have emerged: stakeholder value maximization and shareholder expense. In this study, we explore these perspectives within the realm of mergers and acquisitions (M&A), one of the most important and far-reaching corporate decisions. Specifically, we examine whether the CSR of the acquiring company impacts M&A performance by analyzing a European sample of 1549 M&A deals announced between 2005 and 2019. Our findings indicate that CSR has a negative effect on stock performance around the M&A announcement, which aligns with the shareholder expense view. We argue that in Europe, where corporate social responsibility (CSR) is already elevated as a result of EU policies and regulations, additional CSR investments may not align with the best interests of shareholders. This serves as an illustration of a Too-Much-Of-A-Good-Thing Effect. However, we also see that CSR has no significant effect on operating performance, which may indicate a financial bias of capital market participants or suggests that investors weigh their own cost-benefit considerations when assessing acquirers' CSR performance.