Sincerity or hypocrisy: can green M&A achieve corporate environmental governance?

Although green mergers and acquisitions (M&A) emerged recently as corporate green management actions, whether they can prompt corporations to achieve green transformation is unclear, as little is known about how green M&A affects strategic decisions on corporate environmental behavior. Based on legitimacy theory, we analyze Chinese heavy-polluting firms listed in the Shanghai and Shenzhen Stock Exchanges from 2009 to 2017 to explore the impact of green M&A on corporate environmental governance. Results show that green M&A has a positive impact on corporate environmental management. Specifically, we find that the positive relationship between green M&A and corporate environmental governance is strong in firms in localities under considerable media scrutiny, as such firms face increased legitimacy benefits and illegitimacy penalties. Conversely, state-owned enterprises (SOEs) weaken this relationship, as such enterprises have natural political connections to undermine legitimacy benefits and avoid illegitimacy penalties. Thus, we argue that media scrutiny and SOEs influence the likelihood of an organization to implement green M&A as a sincere substantive strategic action. Finally, we summarize the green M&A implementation of an organization in environmental governance as a sincere green action rather than hypocritical greenwashing. Furthermore, we make contributions to legitimacy theory and the corporate environmental governance literature.