Abstract
This paper investigates the effects that certain characteristics of blockholders have on the environmental and social performance of M&A target firms. First, adopting a counterfactual methodology on a large sample of listed companies, we show the existence of a positive impact of blockholders on target ESG performance. Then, we find that the ESG performance of the target firm does not differ depending on whether the blockholder is a financial or a strategic buyer. This contrasts the general wisdom that the aim of financial acquirors is to maximize short-term profit and so will likely overlook long-term sustainability projects. In addition, acquisitions that are followed by a decrease in leverage are linked to significantly higher ESG performance over the long-term. These results highlight the positive impact of blockholders’ equity investments on environmental and social practices—both strategic and financial. This novel empirical evidence should be valuable to policymakers who wish to define an institutional environment that can speed up sustainable transitions and for investors and managers evaluating M&A deals.
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Acknowledgments
We would like to thank the editor and the two anonymous reviewers for their constructive comments. We also wish to thank Alberto Frausin and Marco Zizzo for providing useful insights during the research design. An earlier version of this paper was presented at the CGRM 2021 Conference - Corporate Governance & Risk Management in Financial Institutions, Roma-Bari, September 24th, 2021. We thank all conference participants for their valuable remarks. All errors are the sole responsibility of the authors.
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We thank FondoFSI for sponsoring this research. FondoFSI participated in the study design, but was not involved in the collection, analysis and interpretation of data, writing of the report, and in the decision to submit the article for publication.
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Taglialatela, J., Barontini, R., Testa, F. et al. Blockholders and the ESG performance of M&A targets. J Manag Gov 28, 625–650 (2024). https://doi.org/10.1007/s10997-022-09665-2
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DOI: https://doi.org/10.1007/s10997-022-09665-2