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How market values firms’ green investment: Evidence from mergers and acquisitions in China

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  • Zheng, Yuan

Abstract

This study examines the market reactions to firms’ green investment. By constructing a fixed-effects panel-data regression based on the framework of mergers and acquisitions (M&As), we find a positive and significant relationship between firms’ green investment and market reactions. This positive relationship is more pronounced among non-state-owned enterprises (non-SOEs) and firms that attract extensive media attention. Furthermore, we examine how regional development bolsters the market’s valuation of a firm’s green investment. Finally, we assess the actual effects of green investment and find that the market valuation of firms’ green investment mainly focuses on improvement in short-term environmental performance, rather than the pursuit of long-term sustainability. The results show the increasing importance of green investment in shaping market perceptions, highlighting a potential misalignment between short-term market incentives and the overarching goals of long-term environmental sustainability.

Suggested Citation

  • Zheng, Yuan, 2026. "How market values firms’ green investment: Evidence from mergers and acquisitions in China," Economic Systems, Elsevier, vol. 50(1).
    • Handle: RePEc:eee:ecosys:v:50:y:2026:i:1:s0939362525000421
    DOI: 10.1016/j.ecosys.2025.101330
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