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“Carrot and stick”: Green fiscal policy, upper echelons expertise, and the green mergers and acquisitions

Author

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  • Yang, Lisi
  • Liu, Linqing
  • Yan, Kai
  • Cai, Chunhua
  • Geng, Yannan

Abstract

Green fiscal policy has played the role of “carrots” (incentives) and “sticks” (penalties) in stimulating firms’ green transitions. Drawing on the behavioral theory of the firm and the quasi-natural experiment of China's National Comprehensive Demonstration of Energy Saving and Emission Reduction Fiscal Policy pilot, this paper explores how time-sensitive and deadline-driven green fiscal policy promotes firms’ green mergers and acquisitions (GM&As). Using data of 3586 Chinese listed firms from 2010 to 2021 and time-varying DID method, this paper discloses a 2.7 % increase in the ratio of GM&As by firms located in the pilot cities. Results remain robust after a series of examinations. Heterogeneity analysis suggests the effect appears more pronounced for firms with younger upper echelons, more female upper echelons, and hometown CEOs. Further mechanism analysis reveals that green fiscal policy can motivate firms to enhance the green expertise of triangular upper echelons (i.e., directors, executives, and supervisors) in enabling the effectiveness of GM&As. However, supervisor expertise does not significantly promote GM&As, highlighting the supervisory ineffectiveness in internal green governance.

Suggested Citation

  • Yang, Lisi & Liu, Linqing & Yan, Kai & Cai, Chunhua & Geng, Yannan, 2023. "“Carrot and stick”: Green fiscal policy, upper echelons expertise, and the green mergers and acquisitions," Finance Research Letters, Elsevier, vol. 58(PD).
    • Handle: RePEc:eee:finlet:v:58:y:2023:i:pd:s154461232301022x
    DOI: 10.1016/j.frl.2023.104650
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    Keywords

    Green fiscal policy; Green mergers and acquisitions; Upper echelons expertise; Supervisory ineffectiveness; Behavioral theory of the firm;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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