M&A activity as a driver for better ESG performance

This paper examines whether mergers and acquisitions (M&A) operations impact firms' performances on triple ESG pillars (environment, social, and governance) using a large panel covering 41 countries and 12 economic sectors between 2002 and 2020. We provide evidence that M&A deals have a positive impact on the ESG score of firms. However, this improvement in the ESG score is not attained immediately, and there is no impact on the ESG score in the year in which the deal is agreed upon. However, an M&A deal appears to be significant in increasing ESG performance when the year following the transaction is considered on its own. Similar results are obtained when considering each of the three pillars - environmental, social, and governance. This paper contributes to both the M&A and sustainability literature by exploring a new topic that addresses the relationship between the two. Policy implications for authorities, regulators, managers, and other stakeholders are also outlined.

Automated summary

This paper examines the impact of mergers and acquisitions (M&A) operations on firms' performances on triple ESG pillars in 41 countries and 12 economic sectors between 2002 and 2020. The study finds that M&A deals have a positive impact on firms' ESG scores, although the improvement is not immediate and is not observed in the year when the deal is agreed upon. However, the positive impact becomes significant in the year following the transaction. Similar results are found for each of the three pillars - environmental, social, and governance. The paper contributes to the M&A and sustainability literature by exploring the relationship between the two, and provides policy implications for authorities, regulators, managers, and other stakeholders.