“Carrot and stick”: Green fiscal policy, upper echelons expertise, and the green mergers and acquisitions

Lisi Yang, Linqing Liu, Kai Yan, Chunhua Cai and Yannan Geng

Finance Research Letters, 2023, vol. 58, issue PD

Abstract: Green fiscal policy has played the role of “carrots” (incentives) and “sticks” (penalties) in stimulating firms’ green transitions. Drawing on the behavioral theory of the firm and the quasi-natural experiment of China's National Comprehensive Demonstration of Energy Saving and Emission Reduction Fiscal Policy pilot, this paper explores how time-sensitive and deadline-driven green fiscal policy promotes firms’ green mergers and acquisitions (GM&As). Using data of 3586 Chinese listed firms from 2010 to 2021 and time-varying DID method, this paper discloses a 2.7 % increase in the ratio of GM&As by firms located in the pilot cities. Results remain robust after a series of examinations. Heterogeneity analysis suggests the effect appears more pronounced for firms with younger upper echelons, more female upper echelons, and hometown CEOs. Further mechanism analysis reveals that green fiscal policy can motivate firms to enhance the green expertise of triangular upper echelons (i.e., directors, executives, and supervisors) in enabling the effectiveness of GM&As. However, supervisor expertise does not significantly promote GM&As, highlighting the supervisory ineffectiveness in internal green governance.

Keywords: Green fiscal policy; Green mergers and acquisitions; Upper echelons expertise; Supervisory ineffectiveness; Behavioral theory of the firm (search for similar items in EconPapers)
JEL-codes: G34 M12 Q58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pd:s154461232301022x

DOI: 10.1016/j.frl.2023.104650

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