To Acquire or to Ally? Managing Partners’ Environmental Risk in International Expansion

Chenchen Huang, Di Luo, Soumyatanu Mukherjee and Tapas Mishra

MPRA Paper from University Library of Munich, Germany

Abstract: Environmental risk (ER) has become increasingly crucial in international business, and firms endeavor to integrate environmental risk management (ERM) into business strategies. Examining a sample of cross-border mergers and acquisitions (M&As) and alliances conducted by US firms from 39 host countries over the last two decades, we show that US firms tend to prefer to choose cross-border M&As over alliances when the ER of foreign partners is high, consistent with the prediction of a mean-variance utility model. The propensity towards M&As is amplified by US firms’ corporate governance quality, financial flexibility, and adherence to the host-country’s sustainability disclosure reforms. Further, US firms experience high announcement abnormal returns when they select M&A deals rather than alliances to manage high ER from foreign partners. Overall, our study provides novel insights into ERM in firms’ decision-making around international expansion.

Keywords: Cross-border mergers and acquisitions; strategic alliances; corporate social responsibility; environmental risk (search for similar items in EconPapers)
JEL-codes: D81 G34 (search for similar items in EconPapers)
Date: 2022-12, Revised 2023-01-07
New Economics Papers: this item is included in nep-env and nep-upt
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Related works:
Working Paper: To Acquire or to Ally? Managing Partners’ Environmental Risk in International Expansion (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:117591

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