Stemming the tide: Does climate risk affect M&A performance?

Article


Lodh, S., Deshmukh, N. and Rohani, A. 2024. Stemming the tide: Does climate risk affect M&A performance? Business Strategy and the Environment. 33 (2), pp. 858-881. https://doi.org/10.1002/bse.3518
TypeArticle
TitleStemming the tide: Does climate risk affect M&A performance?
AuthorsLodh, S., Deshmukh, N. and Rohani, A.
Abstract

We examine the effect of climate change risks (CCR) on firms' decision of engaging in mergers and acquisitions (M&A) and M&A performance. In this study we use the responses by firms on ‘climate change-related risks and opportunities’ of the CDP survey and 1,372 deals of listed US firms during 2010-2020. Consistent with risk vulnerability theory, our evidence indicates that firms with higher CCR have a lower probability of engaging in M&As. After controlling for possible endogeneity, our results also indicate that if acquirers with higher climate change risks choose to engage in M&A, it significantly reduces the announcement returns. These findings suggest that extant measures of climate change risks should be rethought when evaluating M&A efficiency. More broadly, our paper provides causal evidence that managers need to integrate CCR into their formal risk management systems to avoid unsuccessful M&As.

Keywordsbackground risk; CDP; climate change risks; mergers and acquisitions; risk vulnerability theory
Sustainable Development Goals13 Climate action
Middlesex University ThemeSustainability
LanguageEnglish
PublisherWiley
JournalBusiness Strategy and the Environment
ISSN0964-4733
Electronic1099-0836
Publication dates
Online02 Aug 2023
Print05 Feb 2024
Publication process dates
Submitted13 Oct 2022
Accepted12 Jul 2023
Deposited07 Sep 2023
Output statusPublished
Publisher's version
License
File Access Level
Open
Copyright Statement

© 2023 The Authors. Business Strategy and The Environment published by ERP Environment and John Wiley & Sons Ltd.
This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.

Digital Object Identifier (DOI)https://doi.org/10.1002/bse.3518
Web of Science identifierWOS:001041375200001
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