Effect of acquisitions on target firms' stakeholder welfare: Evidence from corporate social responsibility

This study examines whether acquirers support targets' superior corporate social responsibility (CSR) and/or remedy targets' greater CSR problems during the post-merger integration process using multinomial logit and panel regression models. Furthermore, the study examines the subsequent impact of the acquirers' decision regarding target stakeholder welfare on acquisition performance based on the post-announcement performance of stock returns. Consequently, we find that acquirers generally do not adopt the superior CSR performance of target firms but instead support their better environmental and product CSR. However, the acquirers do not remedy any of the target's greater CSR problems. This study also reveals that the acquirers supporting targets' superior overall CSR have higher post-announcement stock returns than others. Meanwhile, post-announcement stock returns are lower when acquirers fail to fix the targets' greater CSR problems. As this study extends findings from recent scholarship reporting a positive association between CSR and acquisition performance, it sheds light on the importance of stakeholders' welfare in mergers and acquisitions.