Climate change exposure and M&A: Global evidence

We present global evidence on the effect of climate change exposure (CCE) on mergers and acquisitions. We find that firms facing higher CCE exhibit a reduced propensity to engage in M&A, and experience a decrease in deal numbers and value. We adopt several identification strategies to mitigate endogeneity concerns. Our results indicate that the cost of financing and cash holdings explain this negative relationship. The effect is more concentrated among US acquirers and developed economies. We also find that firms proactively engage in sustainable practices to mitigate such adverse impacts of CCE. Finally, firms with higher climate change exposure also take more time to complete a deal, earn insignificant announcement returns, and exhibit poor operating performance. Overall, our study highlights the importance of considering climate change in M&A decision-making.