CSR and Value Creation: Does CSR Performance Affect Merger Outcome?

Abstract: With the ever-increasing global challenges, the world is facing, sustainability continues to be a major focus in society. Consequently, corporate social responsibility (CSR) is becoming an increasingly common topic of discussion for businesses. Today, firms are dedicating more resources to CSR than ever. This article studies the relationship between firms CSR performance and merger announcement returns. Previous literature examining this relationship has primarily found a positive connection. However, these studies have mainly been based on US mergers. By using a large sample of European mergers, we test if the previously found positive relationship between CSR performance and merger announcement returns also holds in Europe, a region which differs from the US in terms of sustainability progress and sustainability-related regulatory practices. We find no evidence that firms with higher CSR performance necessarily realize higher post-merger announcement returns in Europe. In some cases, low-CSR firms show higher returns while in other cases high-CSR firms show higher returns, with statistically insignificant differences. Thus, we conclude that there is no clear indication whether higher CSR performance in Europe results in higher merger announcement returns.