The Determinants of Mergers & Acquisitions in a Resource-Based Industry: What Role for Environmental Sustainability?

Roberto Leon-Gonzales and Lise Tole
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Roberto Leon-Gonzales: National Graduate Institute for Policy Studies (GRIPS) and Rimini Center for Economic Analysis (RCEA)
Lise Tole: Rimini Center for Economic Analysis (RCEA)
Authors registered in the RePEc Author Service: Roberto Leon-Gonzalez

Review of Economic Analysis, 2015, vol. 7, issue 2, 111-134

Abstract: We examine the relationship between environmental stringency and mergers and acquisitions (M&A) activity in a highly polluting, resource-based industry. Specifically, we seek to determine whether buyers are targeting countries with the same or different levels of environmental stringency than in their own country, i.e. whether pollution havens exist in the global mining industry. Rather than aggregate investment, which has been used by most previous studies, we analyze a dataset of individual investment choices. We model the choice of country and the amount invested jointly as the two variables are likely to be correlated. The choice of country is modeled using a random parameters multinomial Logit model. We use a new data set of the value paid for all completed M&A in the mining industry worldwide between 1994 and 2006. We find no evidence of pollution havens in this industry. If anything, buyers from countries with high levels of environmental stringency are more likely to invest and make larger investments in countries with a similar level of environmental stringency than in less environmentally stringent countries.

Keywords: Environmental stringency; global mining industry; pollution havens; random parameters multinomial logit; sample selection; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: C11 C33 F18 Q56 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:ren:journl:v:7:y:2015:i:2:p:111-134

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