The stock market reaction to Green M&As : an empirical analysis of companies listed in the US and UK

2019

This thesis seeks to investigate the relationship between shareholder value and acquisitions

with a environmental-friendly ("Green") perspective. By examining the shareholders

reaction to the announcement of Green acquisitions, we investigate whether there are

significant abnormalities in the security stock prices. We believe that the increasing

focus towards corporate social responsibility (CSR) and environmental social governance

(ESG) during the last decade makes the investigation of shareholders reaction to Green

acquisitions an interesting topic to study.

To the best of our knowledge, little research within the field of Green M&As have been

conducted, and we believe that the ongoing shift and increasing focus towards CSR and

ESG encourages research within this field. By performing an event study and a crosssectional

analysis, we aim to contribute to research by investigating differences between

Cumulative abnormal returns (CARs) for shareholders observing a Green acquisition and

for shareholders observing a non-Green acquisition.

We perform this study by analyzing a total of 40 Green deals from US and UK during the

last decade, as well as a corresponding matched sample with 40 Non-Green deals.

Our results suggests that the acquisition of a Green target company does not create

significant value for the acquiring shareholders. When comparing our Green sample

to the Non-Green sample, we find that without controlling for firm and deal-specific

characteristics, the Green sample yield a higher, significant mean in CAR. However,

when adding firm and deal-specific characteristics as explanatory variables through our

cross-sectional analysis, we find that the differences in CAR instead is explained by dealand

firm-specific characteristics. Put differently, our results suggest that investors do not

value Green acquisitions higher than Non-Green acquisitions in terms of equity valuations.

We also observe that the acquisition of a company in another sector destroys shareholder

value during our event window. Lastly, our study supports previous research by showing

that acquiring shareholders, on average, does not experience significant value creation

through acquisitions.

Keywords – M&A, Green, Cleantech, Renewables, NHH