Impact of Differences in ESG Standards in Different Countries and Regions on Cross-National Mergers and Acquisitions Premiums

Abstract

As global ESG (environmental, social, and governance) data increases, the ESG data standards of emerging markets and developed countries are different, and the disclosure differences are significant. In addition, the lack of non-financial factors and lax pre-processing have limited the quantitative and comparative research of cross-national mergers and acquisitions (M&A). In this study, a unified scoring system is constructed to target the heterogeneity of ESG indicators in various countries. By retaining the country weight differences in the raw data, the impact of standard differences on the score is separated in the normalization process. Subsequently, cross-national M&A transaction data is obtained from the database, and the premium rate formula is used to calculate the M&A premium of each transaction as the empirical regression-dependent variable. This paper uses ordinary least squares (OLS) to construct a multivariate regression model to examine the impact of ESG scores on M&A premiums while taking financial, industry, and macroeconomic factors as control variables. Finally, this study selects instrumental variables such as historical ESG disclosure duration and national regulatory intensity, uses two-stage least squares (2SLS) for estimation, and uses heteroskedasticity-robust standard errors and split-sample tests to test the robustness of the model results. The experiment shows that the explanatory power of ESG scores on M&A premiums in the benchmark model is R2 = .214, which rises to R2 = .415 after controlling for financial, industry, and macro variables; R2 in developed country samples is .442, significantly higher than 0.359 in emerging markets; the 2SLS model has a lower prediction error, with an F-statistic of 107.57, p < .001, and a significant regression coefficient without multicollinearity. This provides a clear path for quantifying the impact of different countries’ ESG standards on cross-national M&A premiums.