Do the shareholders take into account the eco-efficiency factor? Evidence from M&A announcement

Abstract

The paper explores some evidence suggesting that company shareholders can consider
an eco-efficiency factor, as a valuable driver for sustainable performance. To look at
it, we analyze the acquisition valuation of high environmental performance firms.
We expect them to be associated with superior cumulative abnormal returns (CAR).
This study computes industry-adjusted eco-efficiency scores at the firm level, using
carbon emission data from the Carbon Disclosure Project for a worldwide sample
from 2006 to 2010. The results show that eco-efficiency is positively associated with
higher acquirer CAR, even after controlling for acquirer and deal characteristics. We
get a range of clues that financial markets reward efforts by firms to reduce their
carbon emissions and enhance their eco-efficiency. The results support the intuition
that eco-efficient acquirers benefit from competitive advantages that strengthen
their negotiating position relative to their target, creating opportunities to increase
value around the deal announcement.