Acquirer ESG, Home Country Policy Enforcement, Country Distance, and Cross-Border Mergers and Acquisitions: Evidence from Chinese Firms

Abstract

This paper examines the impact of ESG (Environmental, Social, and Governance) on cross-border M&A activities and outcomes from the perspective of emerging economy firms. Using cross-border M&A events of Chinese acquirers between 2009 and 2021 as a sample, we employ logistic regression and multiple linear regression for analysis and conduct robustness tests. The study finds that: (1) Acquirers with lower ESG ratings are more likely to choose other developing countries for M&A, and the home country’s policy enforcement significantly positively moderates this relationship; (2) Lower ESG ratings of acquirers have a significant negative impact on their M&A performance, while the country distance between China and the host country does not have a significant moderating effect on this relationship. These results suggest that under strong home country policy enforcement, emerging economy firms are pressured by their home country’s ESG ratings to choose host countries with lower ESG requirements for M&A. However, this approach is like “drinking poison to quench thirst”; while selecting an “ESG haven” can temporarily reduce ESG rating pressure, low ESG ratings ultimately result in lower M&A performance.

Received: 19 July 2024 | Revised: 2 September 2024 | Accepted: 17 September 2024

Conflicts of Interest 

The authors declare that they have no conflicts of interest to this work.

Data Availability Statement

The data that support the findings of this study are openly available in this paper.

Author Contribution Statement

Jianquan Guo: Conceptualization, Methodology, Software, Validation, Formal analysis, Investigation, Resources, Data curation, Writing-Original Draft, Writing-Review & Editing, Visualization, Supervision, Project Administration, Funding acquisition. Jiao Kou: Methodology, Software, Validation, Formal analysis, Investigation, Resources, Data curation, Writing-Original Draft, Writing-Review & Editing, Visualization.