Detangling the role of environmental, social, and governance factors on M&A performance

Abstract We empirically investigate the different role the environmental, social, and governance (ESG) factors play on Mergers and Acquisitions (M&A) performance. In general, our results confirm that acquiring companies have a benefit if they acquire a target with a higher ESG score, in line with recent evidence. But have the single ESG factors the same impact in the value appreciation by financial markets? To answer this question, we detangle the single effects of the ESG factors and we show that, on a stand‐alone basis, a superior social commitment and a higher environmental score are not relevant for M&A value creation, whereas better corporate governance standards affect positively the takeover performance. The analysis of residuals and the Q‐Q plot confirm the robustness of our empirical results which open new research routes for the investigation of the differential role that ESG factors may have in guiding corporate decisions towards M&A transactions capable of value creation.