Results

1. Short-run Announcement Stock Performance

Table 4 reports the cumulative abnormal returns of the full sample of the acquiring firms around the announcing day. For all the windows (-1,-1) (0,0) (+1,+1) (-1,+1) (-3,+1) (-20,+1), CSR bidders outperform non-CSR firms. For CSR firms, the CARs are significantly positive for window (0,0) (+1,+1) (-1,+1) (-3,+1), insignificantly positive for window (-1,-1) (-20,+1). For non-CSR firms, the CARs are significantly negative for window (-1,-1), insignificantly negative for window (+1,+1) (-1,+1) (-3,+1) (-20,+1) and insignificantly positive for window (0,0). This result corresponds to Fuller et al.

(2002)’s statement that on average, bidders in merger and acquisition’s announcement gain a zero abnormal return, and acquirers do not lose necessarily (Andrade et al.

(2001)). It is noteworthy that CSR firms outperform non-CSR firms significantly by 1.97% for window (+1,+1) , 3.67% for window (-1,+1), 3.69% for window (-3,+1) and 4.79% for window (-20,+1). Fuller et al. (2002) have mentioned that “while bidder returns are on average small, there is a tremendous variation in returns and many bidders are trying to be one of the winning firms.” Given the significant difference between CSR and non-CSR bidders, we claim that CSR firms win from the numerous

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bidders.

Table 5 reports the cumulative abnormal returns for bidding firms at the announcement period (-1,+1), grouped by 4 panels. Panel A contains the results for the matching sample by payment methods. For common bidders, takeovers by cash payment usually outperform those using stock (Travlos (1987)). However, in our matching sample, we find bidders using cash payment underperform bidders using stock or mix payment, both in the CSR group and non-CSR group. For non-CSR firms, there is a significant 2.53% abnormal return using cash compared to a significant 3.46% using stock, and for CSR firms, the abnormal return using cash is 2.75%. In addition, CSR bidders using mix payment underperform their non-CSR peers by 0.56% insignificantly.

Panel B contains the results for the matching sample by diversify dummy.

Non-CSR firms seem to make diversify takeovers more frequently than CSR firms. In the non-CSR group, the cross-industry acquisitions gain a significant 5.07% versus to the a significant 2.42% abnormal return by acquisitions in the same industry. This result contradicts to (Jensen (1986))’s argue that diversified mergers are less likely to succeed since acquiring firms are not familiar with the target industry.

Panel C reports results by target public status. For both CSR and non-CSR groups, takeovers with publicly traded targets outperform private targets and contradicts to (Faccio, McConnell, and Stolin (2006))’s result that acquisitions of unlisted targets will win while acquisitions of listed targets will lose. We repute that for these takeovers with larger bidder size, investors treat them different from common takeovers, thus give different results.

Finally, results on Panel D also suggest some distinctions between CSR and non-CSR bidders. Takeovers by CSR firms with higher relative size will underperform non-CSR firms, but for those takeovers with lower relative size, the result is opposite.

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Since greater relative size provides the target firm greater bargaining power (Kooli et al.

(2003)), it is more difficult for bidder to buy a relatively larger target. However, in our matching sample, both CSR and non-CSR bidders give the opposite answer. Our result show that CSR bidders for relative size greater than medium gain a significant abnormal return by 3.12%, greater than those for relative size less than medium with a significant 2.99% abnormal return.

2. Long-run Stock Performance

Table 6 reports the long-run stock return post M&A for both CSR bidders and non-CSR bidders using the BHAR measure. We find that CSR bidders underperform their non-CSR matching firms insignificantly for all the three holding periods. The CSR bidder’s BHAR is an insignificant negative 12.98% than their non-CSR matching firms for holding 1 year, insignificant negative 10.24% for holding 2 years, and insignificant negative 0.81% for holding 3 years.

However, in Table 7, we can see CSR bidders’ long-run stock returns insignificantly positive for all the three holding periods under Fama and French three-factor model and Carhart four-factor model using the OLS and WLS methods. The weight is defined as 1 divided by the volatility square. Only when holding for 3 years using WLS method can we find CSR firms perform significantly positive (0.0050% and 0.0063%). We suspect there’re two reasons for these confused results using different models. First is the number of samples are limited. The data period is from 1991/01 to 2010/12. In order to calculate the 3-year stock return, the event month period is from 1992/01/ to 2007/12 and the sample number is down to 77. The second is that CSR firms may have specific characters these two models can’t detect. This unresolved problem provides direction for future research as well.

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In Table 7, we also test the robust t-value. The robust t-value is 0.28, 0.37 and 1.14 for CSR bidders and 1.90, 2.15 and 2.46 for non-CSR bidders under the Fama and French three-factor model; and is 0.37, 0.56 and 1.54 for CSR bidders and 1.87, 2.38 and 2.89 for non-CSR bidders under the Carhart four-factor model.

3. Cross-section Analysis

Table 8 presents regression results of factors influencing the acquirers’ announcing returns on announcement period (-1,+1). After controlling for log of firm size, log of B/M ratio, relative size, target public status dummy, payment method dummy and diversify dummy, we find a significant positive relation between CSR dummy and the bidders’ announcing returns. In the matching sample (totally 168 observations with 84 CSR firms and 84 non-CSR peers), we find CSR dummy a significant positive relation (0.0388) with bidder’s announcement period abnormal return. The CSR dummy also shows a significant positive influence (0.0230) on bidder’s stock price when we use the full sample (4,527 observations bidding firms with 112 firms missing). Our results indicate that investors really favor for CSR firms in the M&A announcement.

Moreover, given the control variables not significant in our matching sample, we offer the regression result for the full sample with 4,336 observations and find all control variables be significant except the Diversify dummy. The Private Target dummy havs a positive 0.0157 relationship between bidders’ announcement period abnormal return, and the Subsidiary Target dummy has a 0.0211 impact. This result is consistent to previous findings that takeovers of publicly traded targets will underperform takeovers of privately held and subsidiary firms (Fuller et al. (2002)). However, for variables log of Firm Size, log of Bidder B/M Ratio and Relative Size, the relationships between these variables and the bidders’ announcement period abnormal return need

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more discussion. The log of Bidder B/M Ratio has a negative impact on bidders’

announcing return, which is inconsistent with previous results that firm with low B/M ratio. Rau and Vermaelen (1997) find that bidders with low B/M ratio will lose, while those with high B/M ratio will experience in the long run. They also mention that firms with low B/M ratio are those with high past stock returns. If such is the case, investors are more likely to overreact to these firms during the announcement period, and this inference may explain our regression result that B/M ratio has a negative impact on bidders’ announcement period abnormal return.

Table 9 presents regression results of factors influencing the acquirers’ announcing returns on announcement period (-3,+1). In the matching sample, CSR dummy still have a significantly positive relation (0.0382) to bidder’s abnormal return, but the significance disappear in the full sample, since there are only 99 CSR firms in the whole sample.

Table 10 demonstrates results of factors influencing the acquirers’ announcing returns on announcement period (-20,+1). We believe in M&A activities, there is insider trading before the announcement (Keown and Pinkerton (1981)). In order to grasp this potential behavior, we examine bidders’ abnormal return from 20 days pre announcement to 1 day post announcement. In the matching sample, CSR dummy has a significantly positive 0.0563 coefficient, which is greater than 0.0388 for window (-1,+1) and 0.0382 for window (-3,+1). We can also find CSR dummy a significantly positive 0.0449 in the full sample. If insider trading really exists, this result may suggest that markets preference CSR firms in the M&A announcing event.

Table 11 reports the values of variance inflation factor of each variable. All VIFs are less than 10. We can exclude the possibility of collinearity.

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