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Carbon risk and investment efficiency: A merger and acquisition perspective

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  • Liu, Kun
  • Su, Xiao
  • Lu, Lingchen

Abstract

With the increasingly stringent global restrictions on carbon emissions, firms are facing growing carbon risks, which may not only drive up firms' pollution control costs but also force them to improve investment efficiency by optimizing investment and saving costs. Taking the Paris Agreement event as the background and using the data of listed companies in China from 2007 to 2020 and a difference-in-differences model, this paper reveals that the increase in carbon risk can significantly improve the investment efficiency of China's carbon-intensive firms. In addition, we find that the increase in carbon risk can encourage firms to carry out mergers and acquisitions to improve investment efficiency. Our findings provide Chinese evidence for the effective link between carbon risk and firm investment efficiency and may serve as a decision-making reference for carbon-intensive enterprises to improve investment efficiency through merger and acquisition activities in the context of increasing carbon risk.

Suggested Citation

  • Liu, Kun & Su, Xiao & Lu, Lingchen, 2024. "Carbon risk and investment efficiency: A merger and acquisition perspective," International Review of Economics & Finance, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:reveco:v:95:y:2024:i:c:s1059056024004866
    DOI: 10.1016/j.iref.2024.103494
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    Cited by:

    1. Van Thi Thuy Vu & Khanh Hoang & Toan Luu Duc Huynh, 2025. "Carbon Transition Risk, Emissions Trading Schemes, and Firm Performance: International Evidence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(2), pages 1297-1314, March.

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    More about this item

    Keywords

    Carbon risk; M&A; The paris agreement; Carbon-intensive enterprise;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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