This study uses the stakeholder theory framework to examine the effects of environmental, social, and governance (ESG) performance on market value in the context of mergers and acquisitions (M&A). Using a global dataset of 215 M&A deals involving acquirers and target companies from 34 countries between April 4, 2009, and December 26, 2024, the study explores how ESG performance metrics of both acquirers and targets influence shareholder reactions to M&A announcements and shareholder value. By examining the relationship between ESG performance and shareholders' wealth in M&As, this research aims to contribute to our understanding of value creation potential in firms that prioritize ESG factors in their decision-making processes and operations. Additionally, it seeks to enhance the existing body of knowledge on the financial implications of ESG practices. This includes providing corporate executives with guidance on M&A decision-making and assisting investors and stakeholders in making more informed decisions about their investment. The results show that M&A announcements do not generate statistically significant abnormal returns for acquirers. Cumulative abnormal returns (CARs) are consistently negative across all event windows, suggesting a tendency toward value destruction for acquirer shareholders. While aggregate ESG scores do not significantly predict short-term shareholder returns, ESG performance at the pillar level provides meaningful market signals about M&A compatibility. Specifically, higher target social performance relative to acquirer negatively affects abnormal stock returns. This finding provides some support for stakeholder theory, as social misalignment between target and acquirer raises concerns about integration costs and delays in expected synergies.
Altinay Gould (Thu,) studied this question.