ESG controversies, greenwashing, and value-destroying acquisitions

Cristian Pinto-Gutiérrez, Pablo Neudörfer and Sebastián Isaías

Journal of Sustainable Finance & Investment, 2026, vol. 16, issue 2, 595-620

Abstract: This study examines whether environmental, social, and governance (ESG) controversies and ESG greenwashing influence the outcomes of merger and acquisition (M&A) transactions. We define greenwashing as the discrepancy between firms’ self-reported ESG scores and those adjusted for undisclosed controversies. Using a sample of 2,045 acquisitions by U.S. firms between 2010 and 2022, we find that higher levels of ESG controversies and greenwashing are significantly associated with lower cumulative abnormal returns (CAR) for acquirers and higher acquisition premiums. These effects are more pronounced among firms with greater analyst coverage or without ESG assurance, suggesting that market penalties intensify when greenwashing is more visible and ESG disclosures lack external validation. The findings highlight ESG misrepresentation as a strategic factor in value-destroying acquisitions and underscore the importance of credible ESG reporting for investors and regulators.

Date: 2026
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DOI: 10.1080/20430795.2025.2581647

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