Carbon Risk in Cross-Border Acquisitions : Do acquirers consider carbon risk in cross-border acquisitions?
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- Master Thesis 
In this master thesis, we study the role of carbon risk in acquisition decisions and how it is related to announcement returns. We analyze the likelihood of cross-border acquisitions based on certain industry and target country characteristics. We find that acquirers with higher levels of emissions are more likely to engage in cross-border acquisitions in countries with lower financial performance (GDP), governance, and environmental regulations. For industries where emissions are a material issue, we find that acquirers with higher levels of emissions are more likely to acquire a foreign target relative to a domestic target. These findings suggest that acquirers use cross-border acquisitions as a strategy to reduce carbon risk by moving emissions abroad. Additionally, we study the relationship between announcement returns and carbon risk in cross-border acquisitions. After controlling for endogeneity, we find that capital markets reward acquiring targets in countries with low financial performance (GDP), and low governance standards. We find that acquirers with higher levels of emissions in a material industry, are associated with higher acquisition announcement returns when engaging in cross-border acquisitions. Our study thus contributes to existing literature with a further understanding of the role of carbon risk in acquisition decisions.