Stakeholder Preservation or Appropriation? The Influence of Target CSR on Market Reactions to Acquisition Announcements

This study examines how target corporate social responsibility affects the economic gains for acquirers, as reflected in market reaction to an acquisition announcement, from two distinct perspectives: stakeholder preservation versus stakeholder appropriation. The stakeholder preservation perspective suggests that positive market reaction to an acquisition stems from potential new value creation by honoring implicit contracts and maintaining good relationships with target stakeholders. By contrast, the stakeholder appropriation perspective posits that positive market reaction is primarily derived through wealth transfer to acquirers by defaulting on implicit contracts with target stakeholders. Using a data set of acquisitions in the United States, we find that target corporate social responsibility is positively associated with acquirer abnormal returns upon an acquisition announcement. Moreover, stakeholder value congruence between the merging firms strengthens this positive relationship, whereas business similarity between them weakens it. These findings align with the stakeholder preservation perspective and challenge the stakeholder appropriation perspective.