The impact of corporate social responsibility on shareholder's wealth: Evidence from mergers
This study examines the ongoing debate about the effects of corporate social responsibility on shareholders' wealth effect from a new perspective. Using a large sample of U.S. mergers and alternative CSR measures, our study empirically examine and extend the stakeholder value maximization theory. We find that market react to firm's responsible and irresponsible CSR activities differently. There is no evidence that the stock market rewards socially responsible acquirers in the short term. However, we do find strong evidence that the market judges investments by socially irresponsible firms more negatively. Our findings are more pronounced on employment relations, environment, human rights and corporate governance CSR dimensions. These results suggest that while firms cannot create shareholder value by simply investing in more socially responsible activities, they can achieve this result by minimizing socially irresponsible behaviors.