Being good when things go bad - Global impact of COVID-19 on value creation of ESG M&A transactions

Abstract

This study examines a global sample of 564 merger and acquisition (M&A) deals in the US, Europe and in the Emerging Markets. Using a time period from January 1st 2015 until April 19th 2021, we investigate how and if the market has reacted differently to acquirers announcements in relation to their ESG rating before and during the COVID-19 pandemic. When combining the three global samples we find some evidence of increase in governance score having negative effect during COVID-19, while increase in social score having slight positive effect in the combined sample. Shifting the focus on the three separate samples, we find that 1) in Europe COVID-19 has had negative effect on all three ESG dimensions, 2) COVID-19 has not had any significant effect in the Emerging Markets, and 3) the US having negative governance and positive social score effect. Our biggest contribution in this study comes from providing additional findings in relation to a similar study conducted by Tampakoudis et.al (2021). Our contribution comes from the additional 9 months in our sample period compared to the sample by Tampakoudis et.al (2021) that ends sharply after the March 2020 market crash. With our significantly longer COVID-19 time period, we argue our findings to capture better the whole COVID-19 time, and not just the market crash period.