Does Corporate Social Responsibility Create Value for Shareholders? Evidence from Swedish Mergers & Acquisitions

Sammanfattning: The question whether Corporate Social Responsibility (CSR) is value enhancing or value destroying has been debated for decades among researchers with no conclusive evidence for either notion. This paper aims to investigate the impact of a company's level of CSR on cumulative abnormal stock returns in connection with Merger and Acquisition (M&A) announcements. Using a sample of M&A transactions (2002 to 2013) announced by companies listed on the Stockholm Stock Exchange (SSE), we construct three statistical models to test our hypotheses. First, we use an instrumental variable approach but find no evidence of a relationship between the level of CSR and positive abnormal stock returns. Second, when decomposing the CSR Index we find a negative statistically significant relationship between abnormal returns and the social and environmental components of CSR Index. However, the relationship is close to zero and thus not economically significant. Third, we also investigate if there is an optimal level of CSR in relation to positive abnormal returns and find no evidence supporting this notion.