Corporate social responsibility (CSR) has become one of the increasingly important means for firms to gain legitimacy. Extant literature on corporate social performance (CSP) suggests that firms with higher CSP tend to have higher degrees of legitimacy and thus more likely to enable firms to gain superior financial performance. However, how the inter-organizational CSP-asymmetries influence the corporate takeover decision, one of the central strategic management issues, remains ambiguous. To address the problem, this study investigates how the asymmetric CSP between the targets and acquirers influences the corporate takeovers with the lens of legitimacy. Specifically, this study argues that when the acquirer’s CSP is higher than the target’s CSP, the pay premiums of the deal tend to be...[ Read more ]

Corporate social responsibility (CSR) has become one of the increasingly important means for firms to gain legitimacy. Extant literature on corporate social performance (CSP) suggests that firms with higher CSP tend to have higher degrees of legitimacy and thus more likely to enable firms to gain superior financial performance. However, how the inter-organizational CSP-asymmetries influence the corporate takeover decision, one of the central strategic management issues, remains ambiguous. To address the problem, this study investigates how the asymmetric CSP between the targets and acquirers influences the corporate takeovers with the lens of legitimacy. Specifically, this study argues that when the acquirer’s CSP is higher than the target’s CSP, the pay premiums of the deal tend to be lower because the higher-CSP acquirer may judge that the lower-CSP target tends to have not contributing to the acquirer’s legitimacy or complementary resources gaining. Furthermore, this study found empirical evidence that the industry distance between the targets and the acquirers has varied moderating effects on the relationship between the different kinds of inter-organizational CSP asymmetries and the deal premiums. This study aims to contribute to the legitimacy, CSR, and M&A literature.

Keywords: Corporate social performance, Asymmetries, Legitimacy, Corporate takeover, Industry distance