Abstract

Using environment, social and governance (ESG) data from the MSCI Intangible Value Assessment (IVA) database, we examine how the aggregate ESG information and the ESG pillar information of targets and acquirers influence their market returns and total market returns around the announcement date. We find that acquirers with higher ESG-related risks and incommensurate managerial ability have lower acquirer and synergistic market returns. We find that an acquirer’s aggregate ESG strength has a significant positive impact on its market returns, yet the impact of a target’s aggregate ESG performance is not very certain or significant. The target’s governance strength and the acquirer’s social strength are valued by the market. We also find that targets in the IVA database tend to be large firms with good performance. This phenomenon may explain the insignificant influences of the target’s ESG performance on announcement date abnormal returns.