Use this URL to cite or link to this record in EThOS:
Title: Empirical investigations into the impacts of corporate responsibility on the market for corporate control : from deal initialization to finalization
Author: Li, Xue
ISNI:       0000 0004 5989 7465
Awarding Body: University of Reading
Current Institution: University of Reading
Date of Award: 2016
Availability of Full Text:
Access from EThOS:
Access from Institution:
This thesis attempts to make original contributions on the empirical impacts of Corporate Social Responsibility (CSR) on the market for corporate control from deal initialization to deal finalization. I identify a bilateral interaction between an acquirer and a target that affects M&A in various ways, rather than the previously identified unilateral impacts from a deal buyer or a seller. Using the most chronologically extensive dataset that has been used in the context of CSR-M&A literature, I first investigate the impacts o f corporate social responsibility on M&A likelihood. I find that more M&A deals are initiated for firms with closer CSR proximity between an acquirer and a target. The higher the Acquirer-Target CSR Difference (ATCD), the lower their M&A likelihood, especially when this CSR implied divergence is large in terms of employee relations, environment and product aspects. From these initialized deals, the probability of completing a deal is reduced by 8.65% if there is a 10% unit rise in ATCD. These results indicate that ATCD is an important determinant of M&A likelihood and deal completion likelihood. It indicates that two firms with close CSR scores arc more likely to merge together given that such similarity brings about familiarity and trust in cultural and managerial aspects between them, thereby contributing to lower operating frictions in the deal process. I then extend the research framework to M&A premium and wealth creation and provide evidence of the existence of a ‘learning effect’. I identify a strong positive link between ATCD and acquisition premium, announcement time combined abnormal return of an acquirer and a target and 2-year acquirer return. The positive linkage on ATCD and acquisition premium indicates that acquiring firms expect more synergies from the transaction with a target that has a contrasting CSR image. The willingness on paying a higher premium portrays acquiring management’s confidence in more future synergistic gains from the deal. The further positive relation between ATCD and announcement time combined abnormal return and acquirer 2- year return ascertain the expected synergistic gain, indicating the market’s appreciation and positive expectation on a mutual ‘learning effect’. The final empirical study explores the impacts of CSR on the M&A method of payment. I find a smaller percentage and a decreased likelihood of stock being used as merger currency as ATCD increases. A 10% unit increase in between-firm CSR difference lowers the stock payment percentage by approximately 5%. A greater fraction of stock is preferred as merger currency to show that the seller and the buyer are willing to share future uncertainties and future profits since a lower ATCD implies a lower level o f ideological difference; this results in greater reliability between contracting parties. The potential linkage between the aforementioned relations (the negative relation between ATCD and stock payment percentage and the positive relation between ATCD and acquisition announcement time returns) are jointly consistent with current M&A literature on financing decisions and acquisition returns. Overall, results in this thesis suggest that practitioners could extend their vision on utilizing CSR engagements as a means of communication, as well as a tool to understanding a contracting party in addition to financial indicators. This work would help firms ease out some of the possible impediments in a deal process and help preserve the value of what has been created and ensure that it continues to grow in the combined entity in the future.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available