Is corporate social responsibility a driver for target selection in mergers and acquisitions? The role of horizontal versus diversifying motives

This study examines the role of a target firm's corporate social responsibility (CSR) commitment in the target selection process in mergers and acquisitions (M&A), with a particular focus on how strategic motives shape this relationship. Contrary to the extant literature, which has largely overlooked the interplay between CSR and M&A strategy, this study differentiates between horizontal (within-industry) and diversifying (across-industry) M&A transactions. By doing so, this study builds upon previous analyses and illuminates how CSR can be a pivotal factor in M&A decisions, contingent on the strategic motives of the acquirer. Thus, this study positions CSR as an intangible asset that can influence M&A decisions, based on the resource-based view (RBV) of the firm. The analysis, based on a sample of 3,447 firms from 2009 to 2020, employs logistic regression models and propensity score matching (PSM) techniques to test the relationship between CSR and M&A target selection. The findings indicate that CSR commitment exerts a more substantial influence on the attractiveness of targets in horizontal M&A, compared to diversifying M&A. Furthermore, the environmental dimension of CSR has been identified to be a particularly salient factor in the context of horizontal M&A transactions.