The Effects of Corporate Social Responsibility on Overseas Mergers and Acquisitions

Evans Fosu ,Deborah Asiedu

doi:10.7176/ejbm/13-6-15

Abstract

This survey studies the effects of corporate social responsibility (CSR) on overseas mergers and acquisitions (overseas M&As) on acquirers’ corporate social responsibility (CSR) using a sample of Ghana multinational firms and MBA students. This study reveals that firms with overseas M&A activities experience an improvement in CSR performance during the post-acquisition period, and this positive effect is more distinctive when the acquisition of targets is from developed markets than from emerging or low-quality markets. Besides, acquirers significantly improve CSR performance following their overseas acquisitions, suggesting that acquirers initiate efforts to improve CSR performance to gain legitimacy in host countries. The study equally finds that host country legal origins, social norms, and the acquirers’ exposure to multiple jurisdictions hold the keys to improving the CSR performance of acquirers. The results appear robust and valid to various measures of CSR and are effective when endogeneity concerns are addressed. Further analyses disclose that overseas M&A firms with high CSR performance show greater CSR initiatives. Overall, our findings add to the field of literature on the influence of legal and social norm origins on shaping stakeholder-oriented practices by showing how overseas M&As may aid as a critical channel through which overseas acquirers bond themselves to the better CSR practices of the host countries. Keywords: Corporate Social Responsibility, Mergers and Acquisitions and Overseas Investment DOI: 10.7176/EJBM/13-6-15 Publication date: March 31 st 2021

Highlights

Corporate social responsibility (CSR) and mergers and acquisitions (M&As) have increased in a substantial amount of exposure over the last three decades the amalgamation of the factors often goes unobserved (Lagas, 2013)
Based on the discussion above, we propose that the acquirer's corporate social responsibility (CSR) performance should be more distinctive when the targets are from institutional environments with better CSR-regime, which leads to the hypothesis below: H2: Acquirer's CSR performances are distinctive when firms are from developed countries
It was shown in the analysis that weak governmental policies to make corporates responsible are lagging, making it difficult for overseas’ firms to initiative CSR practices that will detriment the people

Summary

Introduction

Corporate social responsibility (CSR) and mergers and acquisitions (M&As) have increased in a substantial amount of exposure over the last three decades the amalgamation of the factors often goes unobserved (Lagas, 2013). Acquirers must meet the expectations of stakeholders in host countries, including customers, suppliers, employees, governments and public interest groups, whose expectations are likely to be different from those stakeholders in the home country These reasons suggest that acquirers may need to take additional CSR initiatives following cross-border acquisitions. The issue of gaining legitimacy significantly affects the success of the overseas acquisitions of firms Recognizing such barriers, the government issues policies and guidance aimed at emphasizing the CSR practices of acquirer firms in host countries as a strategy to strengthen reputation and build legitimacy. Apart from the government-driven focus on CSR in overseas acquisitions, anecdotal evidence suggests firms have incentives to enhance their reputation domestically by acquiring strategic assets abroad This is largely due to consumers placing greater trust in foreign products relative to domestic products and due to the environmental pollution in some countries. This work is designed to explore the institutional challenges, mergers and acquirer’s CSR performance in CSR initiatives

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Conclusion