The mediating role of greenwashing behaviour in the relationship between acquirers’ ESG performance and long-term M&A performance: Evidence from Chinese listed firms

Abstract

The study investigates the impact of acquirers’ environmental, social, and governance (ESG) performance on long-term mergers and acquisitions (M&A) performance, along with the mediating role of greenwashing behaviour. The study explores how ESG performance affects post-acquisition success directly or indirectly through its influence on greenwashing. A quantitative archival research design was used by analysing panel data from 777 acquiring firms listed on the Shenzhen and Shanghai Stock Exchanges between 2009 and 2022, resulting in 1,689 firm-year observations. Environmental, social, and governance performance was assessed using established environmental, social, and governance ratings, while greenwashing behaviour was measured through the discrepancy between standardised environmental disclosure and environmental performance scores. The results reveal that ESG performance does not significantly impact long-term M&A outcomes. Contrary to expectations, ESG performance positively impacted greenwashing behaviour, which means that firms with stronger ESG reputations may carry out sustainability communication that exceeds their environmental performance. Greenwashing behaviour was not found to significantly impact long-term M&A outcomes, and no mediating effect was found. The study makes a contribution to existing ESG and M&A literature by challenging the assumption that ESG performance translates into better acquisition outcomes. This relationship between ESG ratings, sustainability disclosure practices, and post-merger performance was also highlighted in the Chinese context. The practical implications are that regulators should strengthen verification of environmental, social, and governance disclosures, while investors and managers should avoid relying solely on environmental, social, and governance ratings when assessing the long-term value potential of mergers and acquisitions.