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Managing Climate Change Risks: Sea-Level Rise and Mergers and Acquisitions

Author

Listed:
  • John Jianqiu Bai

    (D’Amore-McKim School of Business at Northeastern University, Boston, MA 02115, USA)

  • Yongqiang Chu

    (Belk College of Business, University of North Carolina Charlotte, 9201 University City Blvd., Charlotte, NC 28223, USA)

  • Chen Shen

    (Ontario Tech University, 2000 Simcoe Street North, Oshawa, Ontario L1G 0C5, Canada)

  • Chi Wan

    (College of Management, University of Massachusetts Boston, 100 Williams T. Morrissey Blvd., Boston, MA 02125, USA)

Abstract

Using a large sample over the period 1986 to 2017, we show that companies with higher exposure to climate change risk induced by sea-level rise (SLR) tend to acquire firms that are unlikely to be directly affected by SLR. We find that acquirers with higher SLR exposure experience significantly higher announcement-period abnormal stock returns. Analyses using failed merger bids as an exogenous shock show that post-merger, analyst forecasts become more accurate and environmental-related as well as overall ESG scores improve.

Suggested Citation

  • John Jianqiu Bai & Yongqiang Chu & Chen Shen & Chi Wan, 2024. "Managing Climate Change Risks: Sea-Level Rise and Mergers and Acquisitions," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 14(01), pages 1-47, March.
    • Handle: RePEc:wsi:qjfxxx:v:14:y:2024:i:01:n:s201013922450006x
    DOI: 10.1142/S201013922450006X
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    More about this item

    Keywords

    Climate change; sea level rise; mergers and acquisitions;
    All these keywords.

    JEL classification:

    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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