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Stakeholder Involvement in Acquisitions

Alumni and External Relations Office    2019-10-31

Stakeholder Involvement in Acquisitions

Speaker: Li Tong, Doctoral Student at the Lee Kong Chian School of Business at Singapore Management University

Host: Associate Professor Zhao Xiaoping

Time: Wednesday, November 13, 2019, 13:30-15:00

Venue: A305, Antai Building

 

Abstract:

This study examines how target corporate social responsibility (CSR) affects the economic gains for acquirers, as reflected in market reaction to acquisition announcement,from two distinct perspectives: stakeholder preservation versus stakeholder appropriation. The stakeholder preservation perspective suggests that positive market reaction to an acquisition stems from potential new value creation by honoring implicit contracts and maintaining good relationships with target stakeholders. By contrast, the stakeholder appropriation perspective posits that positive market reaction is primarily derived through wealth transfer to acquirers by defaulting on implicit contracts with target stakeholders. Using a dataset of acquisitions in the US, we find that target CSR is positively associated with acquirer abnormal returns upon acquisition announcement. Moreover, stakeholder value congruence between the merging firms strengthens this positive relationship, whereas business similarity between them weakens it. These findings align with the stakeholder preservation perspective and challenge the stakeholder appropriation perspective.

 

Bio:

Li Tong is a doctoral student at the Lee Kong Chian School of Business at Singapore Management University. His research interests are in the areas of corporate governance, corporate social responsibility, and M&A. His research has appeared in many management journals such as Academy of Management Journal and Journal of Business Ethics.