Legitimacy and Opportunism: Examining Climate Risk and Green Mergers and Acquisitions in Polluting Firms

ABSTRACT Corporate green mergers and acquisitions (GM&As) activities are perceived as important signals of legitimacy. However, amidst the pressing climate crisis, GM&As by companies may be driven by opportunistic behavior with instrumental motives, especially in emerging markets. Drawing on dual legitimacy theory, we examine how climate risk shapes polluting firms' GM&A decisions. Using a dataset of M&As by polluting listed companies in China, we find that firms facing higher climate risks are more likely to undertake GM&As, but this impact is not sustained in the long run. We also find that this relationship depends on the reactive pressure transmission mechanism of climate risk and is positively moderated by executive environmental background and industry competition. Further evidence suggests that under climate risk pressures, GM&As by polluting firms may be more instrumentally motivated, as these firms tend to adopt a “scale over quality” approach to GM&As. Moreover, their post‐GM&A environmental investments and carbon reduction outcomes show no significant improvement, indicating an escalation in greenwashing behaviors. Our research provides new causal evidence for stakeholders to discern the true motivations behind GM&A activities of polluting firms.