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Does Corporate Social Responsibility Create Value in Acquisitions? Evidence from the German Market

Author

Listed:
  • Jan-Luca Walter

    (ESB Business School, Reutlingen University, 72762 Reutlingen, Germany)

  • Michel Charifzadeh

    (ESB Business School, Reutlingen University, 72762 Reutlingen, Germany)

  • Tim Alexander Herberger

    (Department of Business Administration, Andrássy University, 1088 Budapest, Hungary)

Abstract

This paper examines the impact of a firm’s Corporate Social Responsibility (CSR) level on abnormal stock returns around merger and acquisitions (M&A) announcements. Using a sample of transactions announced by German DAX-listed acquirers from 2017 and 2022, the analysis assesses whether CSR creates value for acquiring firms’ shareholders and offers a comprehensive discussion of potential factors supporting or opposing this notion. Our study seeks to fill a notable gap in the German literature on the relationship between CSR performance and abnormal stock returns surrounding M&A announcements. Building upon prior research findings in the US and in an international sample, our investigation focuses on the German market. Employing event study methodology, our results indicate that M&A transactions of German-listed acquirers did not yield significant negative or positive cumulative abnormal returns for event windows of 3 and 11 days. Furthermore, based on multiple linear regression, no evidence was found that CSR positively or negatively influenced abnormal stock returns following M&A announcements, suggesting that positive and negative effects potentially offset each other. The outcomes of our research have important implications for investors, as CSR initiatives do not serve as a positive trading signal, guaranteeing excess returns, which contrasts findings from previous studies in other developed countries. For managers, it is essential to concentrate on factors beyond CSR performance, such as synergies and fit. Finally, both managers and investors should not view CSR as a shareholder value-enhancing short-term investment but as an integral component of fostering sustainable business development.

Suggested Citation

  • Jan-Luca Walter & Michel Charifzadeh & Tim Alexander Herberger, 2024. "Does Corporate Social Responsibility Create Value in Acquisitions? Evidence from the German Market," JRFM, MDPI, vol. 17(6), pages 1-23, June.
    • Handle: RePEc:gam:jjrfmx:v:17:y:2024:i:6:p:250-:d:1417462
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    References listed on IDEAS

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    1. Ioannis Tampakoudis & Evgenia Anagnostopoulou, 2020. "The effect of mergers and acquisitions on environmental, social and governance performance and market value: Evidence from EU acquirers," Business Strategy and the Environment, Wiley Blackwell, vol. 29(5), pages 1865-1875, July.
    2. Rim Makni & Claude Francoeur & François Bellavance, 2009. "Causality Between Corporate Social Performance and Financial Performance: Evidence from Canadian Firms," Journal of Business Ethics, Springer, vol. 89(3), pages 409-422, October.
    3. Paul C. Godfrey & Craig B. Merrill & Jared M. Hansen, 2009. "The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis," Strategic Management Journal, Wiley Blackwell, vol. 30(4), pages 425-445, April.
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