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korean management review - Vol. 54, No. 3

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korean management review - Vol. 54, No. 3, pp. 501-531
Abbreviation: kmr
ISSN: 1226-1874 (Print)
Print publication date 30 Jun 2025
Received 29 Oct 2024 Revised 21 Feb 2025 Accepted 22 Feb 2025
DOI: https://doi.org/10.17287/kmr.2025.54.3.501
The Spillover Effect on CSR Engagement of Financially Constrained Firms: Evidence from the Mergers and Acquisitions Contexts
GRACE Il-Joo Kang ; Sungmin Jeon
(First Author) SUSS Singapore University of Social Sciences (graceiljookang@gmail.com)

(Corresponding Author) Chonnam National University (sungmin.jeon@jnu.ac.kr)

M&A를 통한 CSR 확산 효과와 재무적 제약 기업의 전략적 대응
강일주 ; 전성민

(주저자) 싱가포르 사회과학대학교

(교신저자) 전남대학교
Copyright 2025 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This study investigates the effect of mergers and acquisitions (M&A) conducted by firms with strong Corporate Social Responsibility (CSR) practices on non-target firms' CSR activities. Specifically, the research focuses on the responses of financially constrained non-target firms. Additionally, we examine their investment behaviors and earnings management strategies as reactions to external CSR pressures arising from M&A activities. Generally, financially constrained firms reduce CSR investments due to resource limitations. However, this study hypothesizes that external pressure from high-CSR acquirers may alter such incentives. Empirical analysis yields three primary findings. First, financially constrained firms increase their CSR engagement when faced with a high concentration of high-CSR acquirers in their industry. Second, this CSR spillover effect is stronger in highly competitive industries. Lastly, these financially constrained firms do not significantly adjust capital investments in physical assets but instead tend to engage in earnings manipulation. These results suggest that financially distressed firms strategically enhance CSR investments under external pressure, such as acquisition threats, as a defensive measure.


Keywords: CSR, Financial constraints, M&A

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∙ The author Grace Il-Joo Kang is an Associate Faculty (Scholarly Academic) at the School of Business, Singapore University of Social Sciences. She received a Ph.D. in Business Administration from Korea University. She worked as a sell-side analyst in the Research Center at Shinyoung Securities. Her research interests include valuation, ESG, tax avoidance, Blockchain, and M&A.

∙ The author Sungmin Jeon is an Assistant Professor of Accounting at the School of Business Administration, Chonnam National University. She earned her bachelor's degree from Korea University Business School and gained industry experience at Citibank Korea. She received her Ph.D. in Business Administration from Korea University. Her research interests include firm valuation, corporate governance, and executive compensation.