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Can ESG mitigate the diversification discount in cross-border M&A?

Authors :
Byoung-jin Kim
Jin-young Jung
Sung-woo Cho
Source :
Borsa Istanbul Review, Vol 22, Iss 3, Pp 607-615 (2022)
Publication Year :
2022
Publisher :
Elsevier, 2022.

Abstract

This study seeks to understand how environmental, social, and corporate governance (ESG) affects business performance and the diversification effect of cross-border mergers and acquisitions (M&A) by examining 129 events on cross-border M&A in the Korean Stock Price Index (KOSPI) market representing emerging capital markets between 2012 and 2018 in 38 target countries. The findings indicate that better ESG engagement has a positive effect on the business performance of cross-border M&A, supporting stakeholder theory and confirming that ESG can serve as a strategy for boosting business efficiency in cross-border M&A. The findings also confirm that diversification in cross-border M&A leads to a diversification discount on business performance, negatively affecting acquiring firms, but that ESG engagement can mitigate the diversification discount as a friendly channel. The study's main contribution is providing empirical evidence that ESG can serve as a friendly channel through which to address the diversification discount issue.

Subjects

Subjects :
G14
G15
G30
G34
Finance
HG1-9999

Details

Language :
English
ISSN :
22148450
Volume :
22
Issue :
3
Database :
Directory of Open Access Journals
Journal :
Borsa Istanbul Review
Publication Type :
Academic Journal
Accession number :
edsdoj.00cd55e01814164bf2b53e64253ccf4
Document Type :
article
Full Text :
https://doi.org/10.1016/j.bir.2021.09.002