The Impact of ESG on Firm Value: Evidence From M&A

Abstract

This thesis examines the impact of Environmental, Social, and Governance (ESG) factors on shareholder value using a large sample of mergers and acquisitions (M&A) deals in the US. Our findings indicate a significant negative relationship between ESG and acquirer firm value around the announcement date. In addition, Governance pillar (G) of ESG is found as the primary contributor to this negative relationship. These results align with shareholder expense theory, indicating that ESG considerations impose costs on acquiring firms in the short term. However, the long-term relationship between ESG and firm value remains inadequately understood due to the absence of a statistically significant coefficient in this research.

Key Words: Environmental, Social and Governance (ESG), shareholder expense theory, Mergers and Acquisitions (M&A), Cumulative Abnormal Return (CAR), firm value