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Is it more profitable to acquire cleaner or dirtier firms?

Author

Listed:
  • Mahelet G. Fikru

    () (Missouri University of Science and Technology)

  • Matt Insall

    () (Missouri University of Science and Technology)

Abstract

Abstract When polluting firms acquire firms in the same industry, do they seek out greener firms to make use of their cleaner technology, especially under threat of penalty for pollution? How does penalty for pollution affect the incentive for acquisition? The result of this study indicates that firms who are penalized for their pollution do not necessarily seek out greener firms to acquire. Our result suggests that it is more profitable for polluting firms to takeover dirtier firms and shut them down. Our result also indicates that, at lower levels of emission tax, the incentive for acquiring a dirtier firm increases with an increase in tax but the opposite is true for higher levels of emission tax.

Suggested Citation

  • Mahelet G. Fikru & Matt Insall, 2016. "Is it more profitable to acquire cleaner or dirtier firms?," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 18(4), pages 443-457, October.
  • Handle: RePEc:spr:envpol:v:18:y:2016:i:4:d:10.1007_s10018-015-0118-1
    DOI: 10.1007/s10018-015-0118-1
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    References listed on IDEAS

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    More about this item

    Keywords

    Pollution intensity; Acquisitions; Abatement; Emission tax; Profitability;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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