Green M&A, legitimacy and risk‐taking: evidence from China’s heavy polluters

Abstract

Green merger and acquisition (M&A) activities may improve heavy polluters’ regulatory and organisational legitimacy, allowing greater access to resources and enhancing risk‐taking capacity. Adopting a proprietary 2008–2013 dataset, we examine outcomes from green M&A for China’s heavy‐polluting firms. We find that heavy polluters’ green M&A is associated with greater risk‐taking. Greater access to resources, and reduced financing constraints and tax liabilities suggest improved legitimacy. These effects are positively related to state ownership and government intervention in the M&A process. Our findings support the Porter hypothesis and have policy implications for green management of heavy polluters in emerging markets.

55 years of Abacus: Evolution of Research Streams and Future Research Directions

“…Recent years have seen a heightened attention to stock market volatility and concerns around stock market crashes (e.g., Abedifar et al ., 2019; Chowdhury et al ., forthcoming; Habib et al ., 2018; Jin et al ., 2019; Kim et al ., 2019; Lin et al ., forthcoming; Park et al ., 2019; Wang et al ., forthcoming), as well as enterprise risks management more broadly (e.g.. Ardiana et al ., 2019; Gong and Subramaniam, 2020; Jia, 2019; Jia and Bradbury, 2020, forthcoming; Jia and Munro, 2019; Johnston and Soileau, 2020; Malik et al ., 2020). As evident from the broader literature within the field, there is also a strong focus on environmental and social risks and the role of corporate social responsibility (CSR) as well as environmental, social and governance (ESG) factors to mitigate those risks, with the view that companies need to respond to changed environmental risks (e.g., Daugaard, 2020; Jagoda and Wojcik, 2019; Li et al ., 2019, Li et al ., 2020; Lin et al ., 2019; Luo and Tang, forthcoming; Shafer and Szado, forthcoming). The field will likely see greater development in the future as firms are faced with the challenge to account for other, longer‐term threats, such as the impacts of climate change and the integration of TCFD (O'Dwyer and Unerman, 2020).…”

The impact of supply chain finance on firm cash holdings: Evidence from China

“…On the other, banks may infiltrate more borrowers through accurate information from the core firm in SCF ( Caridi et al, 2010 ; Hofmann, 2014 ). Under noticeable information asymmetry, banks in China are often reluctant to lend to private firms or SMEs ( Wu and Xu, 2020 ; Li et al, 2020a ). Innovative financial solutions within the core firm may also contribute to increased commission fees for the banks besides better risk management of loans to the supply chain.…”

“…Often with better access to bank loans and enjoying more commercial credit, a core firm in SCF can share its financial resources with other firms in the supply chain or provide guarantees to facilitate small and medium-sized enterprises (SMEs) to borrow bank loans. Given the outstanding lending preference towards state-owned enterprises (SOEs) ( Xu and Lin, 2007 ; Fu et al, 2015 ; Xu et al, 2015 ), and the traditional bias against either SMEs or those of private ownership ( Allen et al, 2005 ; He et al, 2019 ; Li et al, 2020a ; Li et al, 2020b ; Wu and Xu, 2020 ), SCF has been growing rapidly in the largest bank-based economy ( Lin and Zhang, 2020 ; Song et al, 2020 ).…”

Long‐term financing effects of Chinese non‐SOEs Belt and Road OFDI

“…Political legitimacy can reduce a firm’s dependence on other stakeholders and assist in external economic interventions (Zheng et al ., 2015). Obtaining political legitimacy can also help mitigate operational risks by reducing administrative regulations (Li et al ., 2020). Therefore, when firms pay attention to public concerns, and particularly government concerns, to obtain legitimacy, they actively adjust their decision‐making to improve their positions in government evaluation systems.…”