Do Financial Markets Reward Eco-Efficiency?
36 Pages Posted: 16 May 2018
Date Written: May 3, 2018
Abstract
To test whether acquisitions by environmentally high performing firms are associated with superior cumulative abnormal returns (CAR), this study computes industry-adjusted eco-efficiency scores at the firm level, using carbon emission data from the Carbon Disclosure Project for a worldwide sample during 2006–2010. The results show that eco-efficiency is positively associated with higher acquirer CAR, even after controlling for acquirer and deal characteristics. Financial markets reward efforts by firms to reduce their carbon emissions and enhance their eco-efficiency. This result supports the intuition that eco-efficient acquirers benefit from competitive advantages that strengthen their negotiating position relative to their target, creating opportunities to increase value around the deal announcement.
Keywords: Eco-Efficiency, Mergers and Acquisitions, Shareholder Value
JEL Classification: G32, G34, M14
Suggested Citation: Suggested Citation