Industrial Pollution and Firm Ownership Structure: Evidence from M&A

Abstract

This paper studies whether firm ownership structure influences pollutive activity. Using facility-level data from the Toxics Release Inventory, I employ a differences-in-differences (DiD) approach to compare toxic chemical release and pollution prevention activity between public and private firms' facilities by exploiting ownership changes. I compare facilities initially owned by private firms that were acquired by public firms and those that were acquired by private firms in the same year. My findings suggest that public acquirers significantly reduce toxic release activity relative to private acquirers. In the reverse case, I find that private acquirers decrease abatement, but pollution volume does not differ significantly. However, for later ownership changes in my sample, private acquirers increase toxic release volume and intensity significantly relative to public acquirers. Lastly, I explore how financial constraints and the local political environment moderate pollution activity. Debt-constrained public acquirers show no significant difference in pollution activity from private acquirers. In Democrat-leaning counties, public acquirers reduce toxic releases more than private acquirers, but in Republican-leaning counties, the differences are less pronounced. Overall, my findings suggest that public firms have decreased toxic release activity over time, but the declines have been offset by increases from private firms.