Breaking deals, counting the cost: CSR shortfall and M&A deal failure in the mandatory CSR framework

Purpose Existing M&A research predominantly focuses on deal success as an important outcome. This study investigates the underexplored phenomenon of deal failure by examining whether corporate social responsibility (CSR) shortfall by acquirers and targets and acquirer-target CSR asymmetry impacts the likelihood of deal abandonment within the unique setting of India's mandatory CSR regime. Reversing the conventional lens from deal success to deal failure, it highlights how CSR shortfall shapes the risk of broken deals in emerging markets. Design/methodology/approach Logistic and probit regressions are employed with year- and industry-fixed effects for 310 Indian M&A transactions (2015–2020). CSR shortfall is defined as the extent to which a firm's actual CSR spending falls below the statutory requirement. Findings CSR shortfall by private acquirers reduces deal failure likelihood, whereas it increases failure risk of publicly listed firms. Moreover, greater CSR asymmetry between acquirers and targets heightens the probability of deal abandonment, indicating that misaligned CSR orientations elevate the risk of M&A failure. Practical implications Managers should recognize CSR shortfall as a strategic risk factor. Aligning CSR spending levels and accounting for public visibility during deal planning can mitigate the risk of deal failure. Originality/value The author provides the first examination of CSR shortfall and CSR asymmetry as drivers of M&A failure in a mandatory CSR regime and shifts the focus from deal success to deal failure. This study extends CSR-M&A research beyond voluntary frameworks to a statutory spending environment.