Spreading the sin: an empirical assessment from corporate takeovers

Guidi, M. , Sogiakas, V., Vagenas-Nanos, E. and Verwijmeren, P. (2020) Spreading the sin: an empirical assessment from corporate takeovers. International Review of Financial Analysis, 71, 101535. (doi: 10.1016/j.irfa.2020.101535)

Abstract

An acquisition of a company involved in socially undesirable activities can have important value implications. On the one hand, stocks in sin industries can be undervalued, and positive wealth effects might be created through risk sharing and a halo effect. On the other hand, acquiring sin stocks could increase litigation risk and the chance of product boycotts, and could hurt relations with employees and other stakeholders. Moreover, many investors avoid investments in sin stocks by applying negative screening. This article empirically establishes that shareholders of acquirer firms on average discount sin acquisitions. The negative wealth effects are stronger in countries with a greater focus on corporate social responsibility and for deals that are more likely to receive public attention. The article concludes that the costs of “sin” are considerable.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Guidi, Dr Marco and Vagenas-Nanos, Professor Evangelos and Verwijmeren, Professor Patrick and Sogiakas, Dr Vasilios
• Authors: Guidi, M., Sogiakas, V., Vagenas-Nanos, E., and Verwijmeren, P.
• College/School: College of Social Sciences > Adam Smith Business School > Accounting and Finance; College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: International Review of Financial Analysis
• Publisher: Elsevier
• ISSN: 1057-5219
• ISSN (Online): 1873-8079
• Published Online: 15 June 2020
• Copyright Holders: Copyright © 2020 Elsevier Inc.
• First Published: First published in International Review of Financial Analysis 71: 101535
• Publisher Policy: Reproduced in accordance with the publisher copyright policy