Do M&As impact firm carbon intensity?11The views expressed in this paper are those of the authors and should not be attributed to the institutions with which they are affiliated.,

Abstract

We examine the impact of domestic and cross-border M&As on firm carbon intensity in a sample of firms from 84 countries over the period 2002–2020. We find that M&As only impact the firm-level carbon footprint in the short-term, where the impact is to raise it, but that there is no impact on the carbon footprint over the medium term. As such, the supposedly greater efficiency of acquirer firms does not appear to translate into innovations that reduce carbon intensity in either the acquirer or target firm. This result is robust to several tests, including controlling for the type of M&A (vertical or horizontal), the relative strengths of environmental regulation (as measured by environmental taxes) in acquirer and target firm country, and to alternative measures of firms' carbon footprint. The results suggest that M&A activity does little to help achieve countries' climate goals, which would be better achieved if regulators and other firm stakeholders require acquirer firms to make public the likely contribution to those goals of the M&A activity that they are proposing.