Pay for Being Responsible: The Effect of Target Firm’s Corporate Social Responsibility on Cross-Border Acquisition Premiums

This study examines the effect of a target firm’s corporate social responsibility (CSR) on its cross-border acquisition premium. Building upon the resource-based view and the institutional theory, we argue that the target firm’s CSR positively affect the cross-border acquisition premium, while institutional distance, cultural distance, and the number of fellow acquisitions moderate the above relationship. Hypotheses are tested in a sample of 252 cross-border acquisitions between 1991 and 2016. Empirical findings show that an acquirer is more likely to pay a higher acquisition premium when acquiring a socially responsible target firm; furthermore, such an effect weakens as institutional distance, cultural distance, and the number of fellow acquisitions increase. This study extends existing research on the importance of CSR as a strategic asset and sheds new light on the role of CSR played in the setting of cross-border acquisitions.