Market dynamics and environmental response: Mechanisms of carbon performance gains from green M&As

As sustainability becomes a central concern in economic policy, firms are increasingly engaging in strategic transactions that reflect environmental priorities. This study examines whether green mergers and acquisitions can serve as effective instruments for enhancing corporate carbon performance. The results indicate that such M&A activities are associated with measurable improvements in carbon efficiency, primarily driven by more disciplined governance practices and a recalibration of innovation strategies. These mechanisms help optimize post-merger resource allocation and reduce inefficiencies linked to symbolic environmental actions. Notably, the benefits are not uniform. They are more evident among firms operating in regulatory-intensive regions, in non-polluting sectors, and those with stronger alignment to sustainability objectives through investor pressure or internal strategies. These findings provide empirical support for the role of market-based environmental instruments in transitioning towards a low-carbon economy. The study highlights the importance of tailoring environmental policy to firm heterogeneity, strengthening institutional frameworks, and encouraging strategic alignment between corporate behavior and environmental goals in emerging markets.