M&A activity as a driver for better ESG performance

•This paper examines whether M&A operations impact firms’ ESG performance.•It uses a large data panel from 41 countries and 12 economic sectors between 2002 and 2020.•It provides evidence that M&A deals have a positive impact on ESG score of firms.•But there is no impact on the ESG score in...

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Bibliographic Details
Published in:Technological forecasting & social change 2022-02, Vol.175, p.121338, Article 121338
Main Authors: Barros, Victor, Verga Matos, Pedro, Miranda Sarmento, Joaquim, Rino Vieira, Pedro
Format: Article
Language:English
Subjects:
Acquisitions
Acquisitions & mergers
Economic sectors
ESG
Governance
Mergers
Ratings
Sustainability
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Summary:•This paper examines whether M&A operations impact firms’ ESG performance.•It uses a large data panel from 41 countries and 12 economic sectors between 2002 and 2020.•It provides evidence that M&A deals have a positive impact on ESG score of firms.•But there is no impact on the ESG score in the deal's year but in following year.•For the environmental, social and governance pillars of ESG, results are similar. This paper examines whether mergers and acquisitions (M&A) operations impact firms’ performances on triple ESG pillars (environment, social, and governance) using a large panel covering 41 countries and 12 economic sectors between 2002 and 2020. We provide evidence that M&A deals have a positive impact on the ESG score of firms. However, this improvement in the ESG score is not attained immediately, and there is no impact on the ESG score in the year in which the deal is agreed upon. However, an M&A deal appears to be significant in increasing ESG performance when the year following the transaction is considered on its own. Similar results are obtained when considering each of the three pillars – environmental, social, and governance. This paper contributes to both the M&A and sustainability literature by exploring a new topic that addresses the relationship between the two. Policy implications for authorities, regulators, managers, and other stakeholders are also outlined.
ISSN:0040-1625
1873-5509
DOI:10.1016/j.techfore.2021.121338