Do green deals attract higher premiums? A study of the potential effect of ESG score on acquisition premium during times of uncertainty
(2024) BUSN79 20241Department of Business Administration
- Abstract
- Purpose: The study aims to investigate whether the ESG score of the target influences the premium paid in M&A transactions. It seeks to contribute to the existing literature by shedding light on the intricate relationship between ESG scores and M&A premiums, especially amid economic uncertainties caused by the COVID 19 pandemic. Furthermore, it aims to examine the potential contributions of separate ESG components to acquisition premiums.
Methodology: The hypotheses were tested using a multivariate analysis that initially employed the ordinary least squares (OLS) regression model. This approach was further expanded to include random effects models and robustness tests to further validate the findings. The acquisition premium is... (More) - Purpose: The study aims to investigate whether the ESG score of the target influences the premium paid in M&A transactions. It seeks to contribute to the existing literature by shedding light on the intricate relationship between ESG scores and M&A premiums, especially amid economic uncertainties caused by the COVID 19 pandemic. Furthermore, it aims to examine the potential contributions of separate ESG components to acquisition premiums.
Methodology: The hypotheses were tested using a multivariate analysis that initially employed the ordinary least squares (OLS) regression model. This approach was further expanded to include random effects models and robustness tests to further validate the findings. The acquisition premium is calculated by observing the percentage change in the target company's stock price between four weeks prior to announcement and the stock price paid by the acquirer. The target ESG score together with COVID-19 variables constitute the explanatory variables of this study.
Theoretical framework: The analysis is based on the theoretical perspectives of information asymmetry and stakeholder theory. The paper then draws upon previous empirical studies done on the relationship between ESG and acquisition premium and factors of uncertainty and acquisition premium.
Empirical foundation: The empirical foundation is based on 340 acquisitions deals where the target firms are based in the North American market, specifically the US and Canada.
Conclusions: The findings reveal that ESG scores generally do not significantly impact acquisition premiums. Though, during the COVID-19 pandemic the individual scores positively influenced premiums, particularly through social and governance scores, indicating their increased value under uncertain times. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9168670
- author
- Behlic, Amina LU and Skyvell, Klara LU
- supervisor
-
- Diem Nguyen LU
- organization
- course
- BUSN79 20241
- year
- 2024
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Merger and Acquisitions, ESG, COVID-19, Acquisition premium
- language
- English
- id
- 9168670
- date added to LUP
- 2024-08-07 15:44:00
- date last changed
- 2024-08-07 15:44:00
@misc{9168670,
abstract = {{Purpose: The study aims to investigate whether the ESG score of the target influences the premium paid in M&A transactions. It seeks to contribute to the existing literature by shedding light on the intricate relationship between ESG scores and M&A premiums, especially amid economic uncertainties caused by the COVID 19 pandemic. Furthermore, it aims to examine the potential contributions of separate ESG components to acquisition premiums.
Methodology: The hypotheses were tested using a multivariate analysis that initially employed the ordinary least squares (OLS) regression model. This approach was further expanded to include random effects models and robustness tests to further validate the findings. The acquisition premium is calculated by observing the percentage change in the target company's stock price between four weeks prior to announcement and the stock price paid by the acquirer. The target ESG score together with COVID-19 variables constitute the explanatory variables of this study.
Theoretical framework: The analysis is based on the theoretical perspectives of information asymmetry and stakeholder theory. The paper then draws upon previous empirical studies done on the relationship between ESG and acquisition premium and factors of uncertainty and acquisition premium.
Empirical foundation: The empirical foundation is based on 340 acquisitions deals where the target firms are based in the North American market, specifically the US and Canada.
Conclusions: The findings reveal that ESG scores generally do not significantly impact acquisition premiums. Though, during the COVID-19 pandemic the individual scores positively influenced premiums, particularly through social and governance scores, indicating their increased value under uncertain times.}},
author = {{Behlic, Amina and Skyvell, Klara}},
language = {{eng}},
note = {{Student Paper}},
title = {{Do green deals attract higher premiums? A study of the potential effect of ESG score on acquisition premium during times of uncertainty}},
year = {{2024}},
}