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Beyond Linear: The Relationship between Corporate Social Responsibility and Market Reactions to Cross-Border Mergers and Acquisitions

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  • Jinyan Shi
  • Conghui Yu
  • Yanxi Li

Abstract

By combining the stakeholder theory and shareholder theory, this study examines whether corporate social responsibility (CSR) influences market reactions to cross-border mergers and acquisitions (M&A) announcements. This study employs a sample of cross-border M&A conducted by Chinese-listed companies from 2010 to 2018. We find that the impact of CSR on cumulative abnormal returns (CAR) around the announcement of cross-border M&A is not monotonically positive or negative demonstrated in previous literatures, but a nonlinear U-shaped relation. This finding shows that compared with moderate level of CSR, acquirers with extremely low or high levels of CSR realize higher CAR, indicating the complementarity of the two long competitive theories. The U-shaped relation remains across a three-step procedure significance test and several robustness tests. This study advances the debate concerning which theory best explains the effect of CSR on CAR theoretically and provides a possible explanation for the existing contradictory evidences empirically owing to ignoring the level of CSR.

Suggested Citation

  • Jinyan Shi & Conghui Yu & Yanxi Li, 2022. "Beyond Linear: The Relationship between Corporate Social Responsibility and Market Reactions to Cross-Border Mergers and Acquisitions," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(3), pages 638-654, February.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:3:p:638-654
    DOI: 10.1080/1540496X.2020.1829409
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    Cited by:

    1. Christoph Kayser & Henning Zülch, 2024. "Understanding the Relevance of Sustainability in Mergers and Acquisitions—A Systematic Literature Review on Sustainability and Its Implications throughout Deal Stages," Sustainability, MDPI, vol. 16(2), pages 1-44, January.

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