Substantive transformation or strategic response? The impact of a negative social responsibility performance gap on green merger and acquisition of heavily polluting firms

Abstract

How to promote heavily polluting firms to achieve substantive green transformation is an important issue. Using the data from Chinese samples, this paper investigates the influence of corporate social responsibility (CSR) performance feedback on the decision and performance of green merger and acquisition (GMA). We find that a negative CSR performance gap is positively related to the likelihood of GMA. From the perspective of market pressure, the mediating roles of negative investor sentiment and media coverage are revealed. Furthermore, the above promotion effect is only reflected in firms with high financial slack, with high public environmental attention, or in the growth stage. Regarding GMA performance, we find that GMA driven by a CSR performance gap merely promotes strategic green innovation, but it promotes substantive green innovation when firms are under high-intensity government environmental regulation. This study provides new insights on how to promote firms to engage in GMA and improve GMA performance.

Keywords:

• CSR performance gap
• green merger and acquisition
• collaborative governance
• investor sentiment
• media coverage

Acknowledgements

Key Projects of Social Science Fund of Jiangsu Province; Policy Guidance Plan Project of Xuzhou City (Soft Science Research).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The datasets used or analyzed during this study are available from the corresponding author on reasonable request.

Supplemental data

Supplemental data for this article can be accessed here.

Notes

1 According to the “Administration of the Acquisition of Listed Firms” issued by the Chinese government, it can be considered a controlling interest in cases where the acquirer holds more than 30% effective voting rights. Accordingly, the acquisition ratio of 30% serves as a criterion for determining whether the acquirer has control over the target firm.

2 As suggested by Pan et al. (2019) and Sun, Kong, and Tao (2023), the acquisition price of 1 million yuan is generally chosen to ensure that an M&A transaction of Chinese firms is meaningful. M&A samples with a low acquisition ratio or acquisition price may not be sufficient to have a significant impact on the acquirers’ performance.

Additional information

Funding

The authors sincerely appreciate the editor and anonymous reviewers for their valuable comments. This work was supported by the National Natural Science Foundation of China [Grant No. L2124032] and National Social Science Fund Later Funding Project of China [Grant No. 21FGLB017].