M&A activity and ESG performance: evidence from China

Abstract

Purpose

This study explores the effect of mergers and acquisitions (M&As) on corporations' environmental, social and governance (ESG) performance and values in the Chinese financial market.

Design/methodology/approach

This study collected data covering 158 Chinese listed companies that have successfully completed at least one M&A activity between 2011 and 2020. Fixed effect and random models based on the Hausman test are adopted to mitigate potential heterogeneity issues in the selection.

Findings

Results show that acquiring targets with high ESG performance can help increase their own ESG performance, which in turn increases their market values. Heterogeneity and robustness tests also provide consistent results. Findings further confirm the bidirectional correlation between ESG and M&As, and then enrich related literature by suggesting the importance of utilizing M&As as a driver to increase corporate ESG performance.

Originality/value

This study embodies the practical implications of ESG and M&A. Managers, investors and policymakers can highly benefit from the results through practical applications.

Citation

Rahman, J. and Wu, J. (2024), "M&A activity and ESG performance: evidence from China", Managerial Finance, Vol. 50 No. 1, pp. 179-197. https://doi.org/10.1108/MF-02-2023-0103