The purpose of this paper is to investigate the relative effects of individual environmental, social and governance pillars on the performance of international mergers. We examine whether performance complementarity exists among the environmental, social and governance pillars.
We draw on a global set of cross-border merger data covering 2002 to 2018 and employ pooled least squares (PLS) and instrumental variable (IV) approaches to gain novel and robust insights into the short- and long-term effects of the relationships among the three CSR pillars on acquisition returns. To study the examined interrelationships across three pillars, we rely on theories related to super-modular optimization and games.
We find positive and significant effects of the environmental pillar and the social pillar on changes in ROA and Tobin’s Q of acquirers during the three years following acquisitions. Furthermore, the governance pillar only impacts short-run ROA change. We found complementarities among the three pillars of CSR to attain performance synergy. The effects of CSR on post-merger performance are more profound in the long run.
We analyze the relative importance of CSR individual pillars (i.e. the environmental, social and governance pillars) and the nature of the relationship among them. This research question remained unexplored in the previous literature. Our analysis sheds light on prevailing concerns regarding the mutual relations among the different pillars of CSR; e.g. previous literature argued that the governance component is different from the social and environmental pillars.
