(Ir)responsible Takeovers
Investors are increasingly prioritizing the societal impact of their portfolio companies and claim to incorporate environmental and social (E&S) factors into their investment decisions. The effectiveness of responsible investment strategies in shaping corporate policies is a topic of ongoing research and debate. In practice, big changes in corporate policy are often the consequence of being […]
Doron Levit is the Marion B. Ingersoll Endowed Professor of Finance and Business Economics at the University of Washington Foster School of Business, and Philip Bond is a Professor of Finance and Business Economics at the University of Washington. This post is based on their recent paper.
Investors are increasingly prioritizing the societal impact of their portfolio companies and claim to incorporate environmental and social (E&S) factors into their investment decisions. The effectiveness of responsible investment strategies in shaping corporate policies is a topic of ongoing research and debate. In practice, big changes in corporate policy are often the consequence of being acquired, and indeed, these acquisitions not only affect shareholder value, but also generate externalities for firms’ various stakeholders. The market for corporate control is therefore a natural domain for responsible investment to make an impact, and consistent with this view, recent evidence suggest that E&S considerations indeed play a role in the dynamics of deal-making.
In our recent paper “(Ir)responsible Takeovers,” we study how responsible investment manifests itself in the market for corporate control. Should we expect the M&A market to push firms towards social efficiency? Or will we instead see socially responsible firms expose themselves to the threat of takeovers by less-socially-minded acquirers?
