Acquirer’s Corporate Social Irresponsibility, Deal Rumor and Cross-Border Acquisition Completion

Abstract

We draw on signaling theory to examine how foreign acquirers’ corporate social irresponsibility (CSI) affects the outcomes of cross-border acquisition completion and how this impact varies according to the existence of deal rumor. We argue that foreign acquirers’ CSI is a negative signal that not only makes firms more likely to be rejected when they seek foreign acquisitions but also leads to longer times to completion even if they are approved. Deal rumor has warming-up effects that amplify the signaling effects of CSI, thereby putting foreign acquirers with CSI in a more unfavorable position. Analyzing a sample of 939 manufacturing sector cross-border acquisitions by firms from European developed countries in the United States during 2000–2019, we find strong support for our arguments.