Does sustainability influence shareholder value creation through inorganic growth? Evidence from metals and mining industry of India

Abstract This study investigates the role of pre-acquisition sustainability performance in shaping shareholder value within India’s metals and mining sector, a domain characterized by high environmental and social impact. Using environmental, social, and governance (ESG) scores from Bloomberg as proxies for corporate sustainability, the analysis draws on acquisition data from Nifty 500 firms between 2010 and 2020. An event study methodology is employed to assess cumulative abnormal returns (CARs) across 24 event windows surrounding acquisition announcements, complemented by regression models to evaluate the impact of ESG variations on post-acquisition firm value, measured through Tobin’s Q. Results reveal a dual narrative: while higher environmental scores are associated with negative short-term market reactions, they contribute positively and significantly to long-term firm valuation post-acquisition. In contrast, social and governance scores do not exhibit statistically significant effects in either time frame. The findings underscore the nuanced role of sustainability dimensions in M&A outcomes and offer strategic insights for investors, regulators, and corporate leaders seeking to align ESG priorities with value creation objectives.