Acquiror Market Performance and Retail Investor Reactions Following M&A Announcement: The Role of Target ESG scores

In recent years, there has been an increase in attention to concepts such as sustainability when it comes to global business (Nosratabadi et al., 2019). ESG (Environmental, Social, and Governance) considerations have become an integral part of corporate strategies, influencing various aspects of decision-making, including investment policies, risk management, and stakeholder relations. Companies are increasingly incorporating ESG factors into their operations to ensure long-term value creation, regulatory compliance, and reputational benefits. Moreover, ESG considerations play a critical role in financial decision-making, as investors and analysts assess firms based on their sustainability performance. Given the growing importance of ESG across multiple business dimensions, its role in corporate transactions, particularly in M&A deals, has gained significant attention. The dimensions regarding ESG matters could help managers in their decision-making process during an M&A deal. With the rise of a greater interest in ESG scores, these scores have become a critical factor in the M&A process, as they indicate how stakeholders perceive companies’ sustainable actions (Franklin, 2019). Galpin and de Vibe (2024) emphasize the importance of ESG scores, showing that companies that ignore ESG considerations during M&A processes risk not only losing potential value but also damaging their corporate reputation. Baratta et al. (2023) strengthen this by highlighting the growing corporate interest in aligning with the United Nations’ Sustainable Development Goals (SDGs) for 2030.