Blockholders and the ESG performance of M&A targets

This paper investigates the efects that certain characteristics of blockholders have on the environmental and social performance of M&A target frms. First, adopting a counterfactual methodology on a large sample of listed companies, we show the existence of a positive impact of blockholders on target ESG performance. Then, we fnd that the ESG performance of the target frm does not difer depending on whether the blockholder is a fnancial or a strategic buyer. This contrasts the general wisdom that the aim of fnancial acquirors is to maximize short-term proft and so will likely overlook long-term sustainability projects. In addition, acquisitions that are followed by a decrease in leverage are linked to signifcantly higher ESG performance over the long-term. These results highlight the positive impact of blockholders’ equity investments on environmental and social practices—both strategic and fnancial. This novel empirical evidence should be valuable to policymakers who wish to defne an institutional environment that can speed up sustainable transitions and for investors and managers evaluating M&A deals.