Green M&A dilemma: Unravelling the impact on high polluting enterprises’ performance

• Green M&As lead to significant declines in short-term market reaction and performance for High Polluting Enterprises (HPEs). • Non-state-controlled HPEs and those with lower ESG see worse post-M&A outcomes. • Higher cash payments and premiums result in poorer performance after green M&As. • HPEs may prioritize environmental goals, potentially reducing shareholder value post-M&A. This paper investigates the impact of green mergers and acquisitions (M&As) on shareholder value within High Polluting Enterprises (HPEs). Analyzing 1,840 M&A transactions involving listed HPEs in China from 2012 to 2020, our study reveals a substantial decline in HPEs' performance post-green M&As. This effect is particularly pronounced among non-state-controlled HPEs, those with fewer financial constraints, and those with lower ESG performance. Additionally, channel analysis indicates that HPEs witness poorer post-green M&As performance when making higher cash payments or offering a premium. Overall, our findings suggest that HPEs may prioritize environmental goals in green M&As, potentially compromising shareholder value.