Retail Investor–Corporate ESG Information Interactions and Corporate Green Mergers and Acquisitions

Abstract

ABSTRACT Research Question/Issue We construct specific indicators of retail investor–corporate environmental, social, and governance (ESG) information interactions and examine their influence on corporate green mergers and acquisitions (M&As). Using data on Chinese listed firms from 2011 to 2019, we shed new light on retail investor activism in sustainable development. Research Findings/Insights Retail investor–corporate ESG information interactions positively influence corporate green M&As. This link is mediated by increased ESG‐related inquiry letters from regulators and by hiring executives with environmental expertise. Government green subsidies can effectively transform the impetus for corporate green M&As derived from retail investor–corporate ESG information interactions. Our subsample analyses indicate that the aforementioned relationship is more pronounced when the interactions are dominated by negative tones and there is less pressure on executives to perform in the short term. Finally, we find that retail investor–corporate ESG information interactions facilitate genuine green transformation rather than just being green for the sake of being green, with reduced greenwashing after green M&A transactions. Theoretical/Academic Implications In the corporate governance literature, retail investors in less developed capital markets are often depicted as passive recipients of information. However, this portrayal overlooks the changing role of retail investors in the digital age and fails to adequately explore how their unique preferences influence corporate strategic decisions. We elucidate the positive role of an emergent sense of responsible investment among retail investors. Practitioner/Policy Implications This study offers valuable insights for policymakers, aiding their endeavors to leverage the positive impact of retail investors. Moreover, our findings highlight a synergistic connection between government green subsidies and the effectiveness of retail investor–corporate ESG information interactions, providing crucial guidance for policymakers in refining institutional frameworks and retail investors to enhance their involvement in corporate governance.

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