ABSTRACT The paper examines whether the environmental, social and governance (ESG) performance of target firms influences both accounting‐based and market‐based corporate financial performance (CFP) within the merger and acquisition (M&A) context and whether this relationship is mediated by the acquirer's corporate social responsibility (CSR) strategy. Focusing on 100 European M&A transactions from 2010–2021, our findings indicate that acquiring ESG‐aware targets improves operational and financial synergies in post–M&A phases, resulting in better long‐term profitability and reduced cost of debt. Furthermore, a formalised CSR strategy of the acquirer mediates this relationship. These findings enrich the M&A‐CSR literature by distinguishing effects on profitability measures from capital markets reactions and, beyond direct effects, by uncovering the mediating role of acquirer's CSR strategy.
Gangi et al. (Sun,) studied this question.