Target Firm's ESG Engagement and Post–M&A Performance: The Mediating Role of Acquirer's CSR Strategy

The paper examines whether the environmental, social and governance (ESG) performance of target firms influences both accounting-based and market-based corporate financial performance (CFP) within the merger and acquisition (M&A) context and whether this relationship is mediated by the acquirer's corporate social responsibility (CSR) strategy. Focusing on 100 European M&A transactions from 2010–2021, our findings indicate that acquiring ESG-aware targets improves operational and financial synergies in post–M&A phases, resulting in better long-term profitability and reduced cost of debt. Furthermore, a formalised CSR strategy of the acquirer mediates this relationship. These findings enrich the M&A-CSR literature by distinguishing effects on profitability measures from capital markets reactions and, beyond direct effects, by uncovering the mediating role of acquirer's CSR strategy.