Climate risk exposure and green mergers and acquisitions: Evidence from China.

This paper examines the relationship between climate risk exposure and green mergers and acquisitions (GM&As), a topic that remains underexplored in prior literature. Using a panel dataset of Chinese A-share firms spanning 2007-2022, we find a positive association between firms' climate risk exposure and GM&As. This result persists after addressing endogeneity concerns and conducting robustness checks. Drawing on dynamic capability theory and risk vulnerability theory, mechanism analysis reveals that this positive relationship is reinforced by improved managerial environmental awareness or robust green innovation capabilities; conversely, it is attenuated by pronounced managerial myopia or acute financial constraints. Further analysis indicates that GM&A activities are primarily driven by transition risk exposure rather than physical risk exposure, with firms in vulnerable industries demonstrating stronger propensities for GM&As. Moreover, climate risk-induced GM&As are accompanied by positive cumulative abnormal returns. These findings contribute theoretical insights for firms and policymakers seeking to address climate risks through green transformation.