Does Inorganic Growth Improve ESG Performance?

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ABSTRACT This article investigates whether mergers and acquisitions (M&A) can be used to strategically uplift environmental, social and governance (ESG) performance of acquiring firms. We conduct a study on 264 international deals announced between 2003 and 2022. The analysis reveals a positive and statistically significant relationship between the change in the acquirer's ESG performance post‐merger (delta) and the pre‐merger difference (spread) in ESG scores between the target and acquirer. This relationship is confirmed across the environmental, social, and governance pillars, both on aggregate and separate basis. Although acquiring firms, on average, improve their ESG performance post‐merger, the observed improvement is much more significant when the spread is positive. However, M&A can reduce the ESG achievements when the target's ESG score is far below that of the acquirer. Additionally, the pre‐merger performance of acquiring firms influences the impact of the spread in the environmental and social pillars, but not the governance dimension. These findings hold for various time horizons.

Ce résumé expose les affirmations des auteurs. BNTIC ne l’interprète pas comme une validation indépendante des résultats.