The Impact of Targets’ Social Performance on Acquisition Premiums

This paper examines whether the corporate social responsibility (CSR) performance of target firms influences the acquisition premiums paid by the acquirers. Using U.S. public merger and acquisition (M&A) deals, I find that acquisition premiums increase in the targets' perceived CSR quality, an effect incremental to previously-documented drivers of such premiums. These findings are also robust to (1) using different proxies for CSR measures and acquisition premiums, and (2) considering various dimensions of CSR (environment, community, employee, product, and diversity). Additional analysis reveals that the positive association between target firms' CSR quality and acquisition premiums is stronger for high-CSR acquirers and larger targets. Overall, I combine the CSR and M&A literature by demonstrating that superior quality CSR performance affects acquisition premiums positively and thus expand our understanding of the value-driven role of CSR initiatives in a unique way