Managing Climate Change Risks: Sea Level Rise and Mergers and Acquisitions

Abstract

Using a large sample over the period 1986 to 2017, we show that companies with higher exposure to climate change risk induced by sea-level rise (SLR) tend to acquire firms that are unlikely to be directly affected by SLR. We find that acquirers with higher SLR exposure experience significantly higher announcement-period abnormal stock returns. Post-merger, analyst forecasts become more accurate and environmental-related as well as overall ESG scores improve.

Keywords: Climate Change; Sea Level Rise; Mergers and Acquisitions

JEL Classification: A14, G41, K42