Environmental Regulations and M&A Decisions of Enterprises: Empirical Evidence from Heavy-polluting Industries

Wang Shaofei; Zhang Yong; Wang Yuzhen

doi:doi:10.16538/j.cnki.fem.20241024.205

Summary

Regional differentiation in environmental regulations will create arbitrage opportunities for corporate pollution control. Taking the release of the “Twelfth Five-Year Plan on Air Pollution Prevention and Control in Key Regions” as an event shock, this paper takes listed companies in China’s A-share heavy-polluting industries in the five years before and after the policy was released as the research sample and empirically tests the impact of regional differentiation in environmental regulations on the M&A decisions of enterprises in heavy-polluting industries. The study finds that environmental regulations will increase the probability and scale of corporate M&As. In terms of target selection for M&As, enterprises are more inclined to implement cross-regional M&As for enterprises in areas with weaker environmental regulations. Mechanism testing finds that the green innovation capability of M&A enterprises does not significantly improve, while the improvement effect on production costs is relatively significant. Moreover, heavy-polluting enterprises in areas with stronger environmental regulations are more likely to implement cross-regional M&As in the same industry. Heterogeneity analysis shows that state-owned property rights and media attention will inhibit enterprises to implement cross-regional M&As for enterprises in areas with weaker environmental regulations, while the government’s emphasis on the environment in the location of the enterprise can increase its M&As in areas with weaker environmental regulations. This paper provides micro evidence for enterprises to avoid differentiated environmental regulations, and provides important policy insights for improving environmental policies and building a unified national market.