How does green finance policy affect firms' pro-environmental mergers and acquisitions?

The study reveals that the Green Credit Guidelines significantly encourage firms' pro-environmental mergers and acquisitions (M&As) among polluting industries, as evidenced by difference-in-differences estimations with Chinese listed firms (2004-2020). Three primary mechanisms include increased commercial credit financing, improvements within firm agencies, and heightened scrutiny from external analysts. The effect is more prominent in non-state-owned firms, firms with a higher number of executives with financial backgrounds, and regions with lower levels of green financial development and environmental regulations. Post-M&A, acquiring firms demonstrate a marked decrease in environmental governance expenses and carbon emissions, alongside an improvement in overall environmental performance.