IDEAS home Printed from https://ideas.repec.org/a/eee/jimfin/v146y2024ics0261560624001189.html
   My bibliography  Save this article

Can Firms’ ESG initiatives deter hostile Takeovers?

Author

Listed:
  • Tsang, Albert
  • Yan, Shuo
  • Zheng, Lingyi

Abstract

In this study, we examine the role of acquiree firms’ environmental, social, and governance (ESG) performance in affecting hostile takeover threats from acquiring firms. Our results show that firms facing hostile takeover threats increase investment in ESG initiatives. The positive association between hostile takeover threats and firms’ ESG investments is stronger for firms domiciled in states with expanded constituency statutes and for firms with fewer antitakeover provisions. Quasi-natural experiments based on the adoption of poison pill statutes further show that firms domiciled in states with such laws tend to exhibit lower levels of ESG investment after (vs. before) the passage of the statutes. In addition, we find that the probability of receiving hostile bids in a given year is lower for firms that increased their ESG investment in previous years, especially firms with a strong threat of ex-ante hostile takeover. Taken together, our findings suggest that firms use ESG investments as an important antitakeover device and that the threat of corporate hostile takeover has unintended effects on firms’ ESG investment and ethical business practices.

Suggested Citation

  • Tsang, Albert & Yan, Shuo & Zheng, Lingyi, 2024. "Can Firms’ ESG initiatives deter hostile Takeovers?," Journal of International Money and Finance, Elsevier, vol. 146(C).
    • Handle: RePEc:eee:jimfin:v:146:y:2024:i:c:s0261560624001189
    DOI: 10.1016/j.jimonfin.2024.103131
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0261560624001189
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jimonfin.2024.103131?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    ESG; Antitakeover; Poison pill statute; CSR; Ethics;
    All these keywords.

    JEL classification:

    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jimfin:v:146:y:2024:i:c:s0261560624001189. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30443 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.