Barrier to a Greener Future? <scp>ESG</scp> Reputation Risk and Corporate Green M&amp;A

ABSTRACT Green mergers and acquisitions (M&amp;A) serve as a strategic tool for firms to achieve rapid green transformation, representing a crucial pathway for nations to address climate change and promote global green governance. Yet, the role of ESG reputation risk in shaping corporate green M&amp;A remains underexplored. This study finds that firms experiencing ESG reputation risk shocks significantly reduce their green M&amp;A activities, identifying ESG reputation risk as a key impediment to corporate green restructuring. The results are robust to a range of robustness and endogeneity tests. Boundary condition analyses reveal that the negative effect of ESG reputation risk on green M&amp;A is amplified in contexts characterized by tightened financing constraints, reduced investment opportunities, heightened regulatory pressure, and diminished institutional endorsement. Additional firm‐level heterogeneity analyses indicate that the inhibitory effect is more pronounced in firms led by CEOs without environmental backgrounds, having sound financial conditions, operating in cities with poor business environments, or holding higher ESG ratings, whereas ownership type shows no significant difference. Overall, this study advances understanding of how ESG reputation pressure affects corporate green M&amp;A, offering insights to enhance ESG governance and facilitate sustainable transformation.