Do ESG risks influence M&A transactions? Evidence from the United States

University essay from Handelshögskolan i Stockholm/Institutionen för finansiell ekonomi

Abstract: Using two large samples of US M&A transactions, this study assesses whether reputational ESG risks of targets and acquirors influence deal completion likelihood, deal duration and bid premium of the transaction. Higher reputational ESG risks of the acquiror are connected to a longer deal duration if the transaction includes a large target or does not involve a tender offer, as well as to a decreased deal completion likelihood for non-competitive and non-tender transactions. Higher reputational ESG risks of the target are related to a shorter deal duration if the acquiror is small or the target has a low leverage. The bid premium remains unaffected by the reputational ESG risks of either transaction party. The impact is slightly stronger for firms from Republican states than for firms from Democratic states. Overall, the results suggest differences between the impact of reputational ESG risks on M&A deals compared to the impact of other ESG scores established in previous research.

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