How Does CSR Affect M&A Performance? Empirical Evidence from Mergers in Northwest Europe

Line Falk Rasmussen & Peter Martin Dyreholt Laursen

Student thesis: Master thesis


Firms in the world’s largest economies are increasingly investing in corporate social responsibility (CSR). These CSR investments meet the interest of multiple stakeholders, and some researchers argue that firms can maximize shareholder value by focusing on the interest of all stakeholders as this makes them more willing to support the firm (stakeholder value maximization view). However, other researchers argue that CSR comes at the expense of shareholders’ wealth because it only meets some of the stakeholders’ conflicting interests (shareholder expense view). To further explore these contradicting views, researchers have started to investigate how CSR affects shareholder wealth in the context of mergers and acquisitions (M&As). Most evidence seems to be in line with the stakeholder value maximization view as they find that acquirers with high CSR performance experience greater cumulative abnormal returns (CARs) around merger announcement, larger gains in long-term post-merger operating performance, higher long-term post-merger stock returns, shorter deal duration, lower deal uncertainty, and smaller bid premiums compared to acquirers with low CSR performance. No study has yet investigated the intersection of CSR and M&A in Northwest Europe, which is surprising as this region is argued to be a frontrunner in promoting CSR. Therefore, this study examines 245 mergers completed by firms from Northwest Europe, and surprisingly our evidence is inconsistent with most previous studies. We find that acquirers with high CSR performance experience lower CARs around merger announcement, no long-term post-merger abnormal stock returns, and inferior long-term post-merger gains in operating cash flow compared to acquirers with low CSR performance. We suggest that this inconsistency compared to previous studies may be explained by differences in institutional contexts, agency costs, the possibility for CSR to be a sustainable competitive advantage, and investors’ attitude towards CSR.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final ThesisMSc in Finance and Investments, (Graduate Programme) Final Thesis
Publication date2020
Number of pages141
SupervisorsSøren Plesner