The influence of ESG on mergers and acquisitions decisions and organisational performance in UK firms: comparison between financial and non-financial sectors

<p dir="ltr">This paper aims at investigating the influence of environmental, social and governance (ESG) on mergers and acquisitions (M&As) decisions/activities and organisational performance in UK- financial and non-financial firms over the period (2012-2022). The theoretical lenses underpinning this study is rooted on stakeholder theory and Resource-Based Theory (RBT). The empirical analysis is based on sample of financial and non-financial firms selected from FTSE All listed companies over the period (2012-2022). Findings of this study reveal ESG score has statistically significant impact on organisational performance in both the financial and non-financial firms. An increase in firm ESG performance significantly increases the likelihood of M&As. The results reveal that the impact of ESG on firm financial performance is negative and significant, but this is not the case for non-financial firms where the impact despite being positive is insignificant. Our findings add to the extant literature recent empirical evidence, our study among the first to examine the influence of ESG on M&As and firm performance through comparison between financial and non-financial sector. Findings of this study have managerial and theoretical implications. Integrating ESG into operational and strategic organisational activities enhance attractiveness to potential bidders and contribute to sustainable financial performance because acquiring targets with high ESG performance can have a positive effect on the acquirer’s post-merger market value, thereby strongly confirming the use of ESG as a value-enhancing strategy to promote corporate external growth.</p><p><br></p>