Abstract
As China’s economic development has shifted from quantitative growth to qualitative improvement, stakeholders have enforced stricter corporate social responsibility (CSR) requirements for listed companies. However, few studies have focused on companies and CSR in such developing economies. We used the CSR scoring system from Hexun Finance’s website to group Chinese listed companies according to their CSR scores. By comparing the effects of merger and acquisition (M&A) announcements on different CSR scores, we found that, first, the average abnormal return (AAR) response time of the low-CSR acquirers group was eight trading days, much longer than that of the medium-CSR (three trading days) and the high-CSR group (four trading days). Second, from five trading days before, and 15 trading days after the announcement date, the cumulative AAR (CAAR) of the acquirers in the low-CSR group was 0.270, much higher than those in medium- and high-CSR groups. Third, after considering the CSR scores for the two years prior to the M&A and controlling for other factors affecting the M&A, the CSR performance of the above-mentioned M&As was still negatively correlated with the M&A announcement effect. This point to the need for further studying CSR and M&A announcement effects for Chinese companies.
Highlights
Since the late 1990s, with the rapid development of its economy, China’s securities market has become one of the most important worldwide
On the day of the announcement (t = 0) 80.14% of the sample had a positive income in the high corporate social responsibility (CSR) group, which was significantly higher than the 74.23% and 74.68% of the medium CSR and low CSR groups, respectively
The proportion of positive income observations in the group with high CSR scores was 71.63%, which was still significantly higher than the 68.04% and 67.09% of the medium and the low CSR groups, respectively. This shows that the stock returns in the secondary market have a relationship with the CSR scores of listed companies undergoing merger and acquisition (M&A)
Summary
Since the late 1990s, with the rapid development of its economy, China’s securities market has become one of the most important worldwide. As China’s economic development shifts from quantitative growth to qualitative improvement, the government and society showed increasingly higher requirements for corporate social responsibility (CSR) from the listed companies. The revision of the Labor Contract Law in 2007, the two amendments to the Consumer Rights Protection Act in 2009 and 2013, the 2014 Overhaul of the Environmental Protection Law, and the revision of the Company Law in 2018 mean that Chinese listed companies must constantly improve their performance and enhance efficiency, while meeting the CSR requirements of employees, consumers, environment, and shareholders. As an aspect of social responsibility, will improve the relationship between the company and government as well as the company’s external operating environment
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