Mergers for the future: The Post-Acquisition Performance of Green M&A

Abstract

This thesis aims to identify the causal relationship between the success of mergers and sustainable growth strategies. Following the realisation of anthropogenic climate changes, academic research has extensively investigated the optimal policies to cut carbon emissions and initiate the transition to a green economy. However, there has been little research on the specific topic of green M&A performance. The popularity of M&A as a growth strategy and the ongoing shift towards a sustainable economy gives compelling reasons to investigate the potential success of green M&A. This thesis investigates post-acquisition performance in the short run by measuring the stock returns of the acquiror. The event study methodology is applied to compare the stock returns from M&A announcements to an estimated alternative where the M&A did not occur. This method isolates the effect of the M&A strategy and specifies how the market evaluates the strategic decision. The results from the study found that an inorganic growth strategy by M&A gives positive returns for the acquirors’ shareholders. Across all 266 announcements, the stock returns are on average higher than what could be expected from market movements on the day of the M&A announcement. However, the returns of the non-green M&A sample are higher than the returns of the green M&A sample, which indicate that investors perceive the traditional M&A strategy as superior compared to green M&A strategies. Further, the returns of the greenwashing sample are not significantly different from the green M&A sample, implying that investors do not differentiate between these strategies or that the identification strategy fails to identify the greenwashing strategy it is supposed to evaluate.