Sustainable businesses in Brazil: the role of merger and acquisition operations and the financial performance in the technology sector under the environmental, social and governance (ESG) criteria

Abstract

The main motivation of this paper is to explore merger and acquisition (M&A) operations from the perspective of the corporate social responsibility impact, specifically regarding financial and sustainable performance in the short-term post-merger. This research aims to fill the gap in the literature on capital stock and sustainability within the M&A context in two manners: analyzing the short-term effects in companies acquired in the technology sector in Brazil and appraising the influence of sustainability practices in the environmental, social and governance (ESG) criteria. The aim is to study the relationship between M&A implementation and the economic-financial performance in ESG practices by Brazilian companies acquired in the technology sector. Based on data from 2018 to 2023, the appraisal was conducted through a panel data model considering Brazilian technology companies involved in M&A. Findings reveal that these operations are related to a significant increase in ESG performance. In addition, the company size evidenced a positive relationship with ESG, suggesting that larger organizations usually score higher. From a theoretical perspective, the research contributes to understanding the role of company size and the debt in ESG performance, highlighting larger companies’ greater capacity to invest in sustainability. From a practical point of view, findings reveal that managers should incorporate ESG as part of the strategy of M&A operations, and not just as a consequence of the financial performance.