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Do environmental, social, and governance standards improve the bargaining power of bidders? An empirical investigation

Tanveer Hussain, Tunyi Tunyi Abongeh Orcid Logo

Journal of Environmental Management, Volume: 373, Start page: 123468

Swansea University Author: Tunyi Tunyi Abongeh Orcid Logo

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DOI (Published version): 10.1016/j.jenvman.2024.123468

Abstract

Drawing from the bargaining power hypothesis, we investigate the impact of environmental, social, and governance (ESG) standards on takeover premiums in the international takeover market. Using an international sample of 8336 mergers and acquisitions from 26 bidder countries between 2003 and 2021, w...

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Published in: Journal of Environmental Management
ISSN: 0301-4797 1095-8630
Published: Elsevier BV 2025
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URI: https://cronfa.swan.ac.uk/Record/cronfa68325
first_indexed 2024-11-25T14:21:52Z
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spelling 2025-02-13T15:15:20.2445165 v2 68325 2024-11-23 Do environmental, social, and governance standards improve the bargaining power of bidders? An empirical investigation eefe2792c8eed5b49feede33981dfa53 0000-0002-5761-931X Tunyi Tunyi Abongeh Tunyi Tunyi Abongeh true false 2024-11-23 CBAE Drawing from the bargaining power hypothesis, we investigate the impact of environmental, social, and governance (ESG) standards on takeover premiums in the international takeover market. Using an international sample of 8336 mergers and acquisitions from 26 bidder countries between 2003 and 2021, we find that bidders with higher pre-deal ESG standards – ESG champions – pay lower premiums to win the bid auction, suggesting that better engagement of stakeholders provides higher bargaining power to ESG champions. Contrary to the stylized fact that bidders destroy shareholder value in mergers and acquisitions, the results show that all bidders are not the same, and those with higher ESG standards enjoy takeover benefits. We also show that board independence and minority shareholder protection are potential channels through which ESG champions pay fair premiums to targets. Finally, the results document that ESG champions select targets from dissimilar industries and engage in cross-border deals to strengthen their reputation among stakeholders. Our results pass several robustness tests and hold after addressing the endogeneity issue. Overall, our findings dispense new evidence on how ESG standards increase the bargaining power of focal firms to negotiate on better terms with targets. Journal Article Journal of Environmental Management 373 123468 Elsevier BV 0301-4797 1095-8630 ESG standards; Takeover premiums; Bargaining power; Board independence; Minority shareholder protection 1 1 2025 2025-01-01 10.1016/j.jenvman.2024.123468 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University Another institution paid the OA fee 2025-02-13T15:15:20.2445165 2024-11-23T12:51:31.5047074 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Tanveer Hussain 1 Tunyi Tunyi Abongeh 0000-0002-5761-931X 2 68325__33323__0277473a654846b4af761e3c14d65200.pdf 68325.VoR.pdf 2025-01-14T10:25:49.8662393 Output 629390 application/pdf Version of Record true © 2024 The Authors. This is an open access article under the CC BY license. true eng http://creativecommons.org/licenses/by/4.0/
title Do environmental, social, and governance standards improve the bargaining power of bidders? An empirical investigation
spellingShingle Do environmental, social, and governance standards improve the bargaining power of bidders? An empirical investigation
Tunyi Tunyi Abongeh
title_short Do environmental, social, and governance standards improve the bargaining power of bidders? An empirical investigation
title_full Do environmental, social, and governance standards improve the bargaining power of bidders? An empirical investigation
title_fullStr Do environmental, social, and governance standards improve the bargaining power of bidders? An empirical investigation
title_full_unstemmed Do environmental, social, and governance standards improve the bargaining power of bidders? An empirical investigation
title_sort Do environmental, social, and governance standards improve the bargaining power of bidders? An empirical investigation
author_id_str_mv eefe2792c8eed5b49feede33981dfa53
author_id_fullname_str_mv eefe2792c8eed5b49feede33981dfa53_***_Tunyi Tunyi Abongeh
author Tunyi Tunyi Abongeh
author2 Tanveer Hussain
Tunyi Tunyi Abongeh
format Journal article
container_title Journal of Environmental Management
container_volume 373
container_start_page 123468
publishDate 2025
institution Swansea University
issn 0301-4797
1095-8630
doi_str_mv 10.1016/j.jenvman.2024.123468
publisher Elsevier BV
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 1
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description Drawing from the bargaining power hypothesis, we investigate the impact of environmental, social, and governance (ESG) standards on takeover premiums in the international takeover market. Using an international sample of 8336 mergers and acquisitions from 26 bidder countries between 2003 and 2021, we find that bidders with higher pre-deal ESG standards – ESG champions – pay lower premiums to win the bid auction, suggesting that better engagement of stakeholders provides higher bargaining power to ESG champions. Contrary to the stylized fact that bidders destroy shareholder value in mergers and acquisitions, the results show that all bidders are not the same, and those with higher ESG standards enjoy takeover benefits. We also show that board independence and minority shareholder protection are potential channels through which ESG champions pay fair premiums to targets. Finally, the results document that ESG champions select targets from dissimilar industries and engage in cross-border deals to strengthen their reputation among stakeholders. Our results pass several robustness tests and hold after addressing the endogeneity issue. Overall, our findings dispense new evidence on how ESG standards increase the bargaining power of focal firms to negotiate on better terms with targets.
published_date 2025-01-01T07:38:46Z
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score 11.067306

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