The Effect Of Corporate Social Responsibility On The Performance Of Cross Border Mergers And Acquisitions

Many factors may influence the performance of cross border mergers and acquisitions(CBMA).Researches on the determinants of CBMA performance show that the characteristics of the acquiring firm,transaction features,institutional and cultural difference could significantly influence CBMA performance.In the last few years,some researchers began to focus on the effect of corporate social responsibility(CSR)on merger performance.Some empirical study shows that whether the transaction is cross border transaction or not will significantly influence the results.By far,both theoretical and empirical researches on the effect of CSR on the performance of CBMA are lacking.However,cultural integration in CBMA is not a new topic.In this paper,we analyze the mechanism on how corporate social responsibility(CSR)affects the performance of cross border mergers and acquisitions(CBMA)under the perspective of cultural integration.We come to the point that CSR is a smoothing factor in cultural integration in CBMA,which helps reduce conflict to lower transaction cost,and provides convenience for further trust and cooperation.To deep further,we analyze the regulating effect of cultural distance on the above relationship.In the empirical analysis part,we examine a sample of 150 cross border mergers with China's listed companies as acquiring firms between 2011 and 2016 to investigate short-term market reactions to deal announcements using event study method and long-term market reactions after deal announcements using BHAR method.Hypotheses are tested by analyzing the results of multiple linear regression models.The empirical results show that cross border mergers and acquisitions(CBMA)create value for acquiring firms during deal announcement period.High pre-merger corporate social responsibility(CSR)acquirers realize higher merger announcement returns,and CSR helps reduce the negative effect of cultural distance on merger announcement return.High pre-merger corporate social responsibility performance will impair acquirer's long-term performance significantly three years after the merger announcement date,while cultural distance doesn't have significant regulating effect in this case.High pre-merger CSR would help increase short-term CBMA performance,and mitigate the negative effect of cultural distance on CBMA performance.Long-term empirical results show us the importance of cultural integration in CBMA,and the need of weighing the costs and benefits of CSR to make the best CSR strategy.