Strategic breakthrough under ecological constraints: how biodiversity risk drives corporate mergers and acquisitions in China

Purpose This study examines how exposure to biodiversity risk shapes corporate merger and acquisition activities. Design/methodology/approach Using data on Chinese A-share firms listed on the Shanghai and Shenzhen stock exchanges from 2012 to 2023, this study employs a two-way fixed effects model to investigate the relationship between biodiversity risk exposure and corporate mergers and acquisitions. Findings Biodiversity risk significantly promotes corporate merger and acquisition activities. Pressure arising from future development expectations and intense market competition constitute two important motives for corporations to pursue mergers and acquisitions when confronted with biodiversity risk. The heterogeneity analysis indicates that this positive effect is more pronounced among privately owned corporations, corporations facing greater capital market pressure, corporations with well-developed internal incentive mechanisms, and corporations with greater environmental sensitivity. Furthermore, corporations exposed to biodiversity risk are more inclined to undertake horizontal and cross-regional mergers and acquisitions. The adoption of merger and acquisition strategies also improves their subsequent financial and sustainability performance. Originality/value This study reveals how biodiversity risk influences corporate merger and acquisition activities. It also contributes to the mechanism analysis by integrating a behavioral decision-making perspective with the external competitive environment.