How does digital transformation drive green technology M&A under the carbon cap and trade policy?

Green technology mergers and acquisitions (GTMA) is a key strategic choice for enterprises' green transformation. But due to difficulties in evaluation, complex post-merger integration, and challenging compliance and risk management, enterprises need two prerequisites before implementation: opportunities and solutions. Among these, the carbon cap and trade policy (CCTP) provides businesses with economic opportunities to explore added value from green technologies. Digital transformation (DT), on the other hand, offers solutions by integrating internal resource management and increasing information transparency. However, the existing literatures overlook the necessity of this complex perspective in the implementation of GTMA strategy. Thus, based on institutional theory and Resource Based View, this paper takes Chinese listed enterprises’ GTMA practices from 2009 to 2021, uses difference-in-differences and moderating variable methods to explore: whether CCTP offers opportunities for GTMA and if DT can solve GTMA problems and its mechanism. Findings show CCTP and DT are prerequisites driving GTMA, and their synergy is crucial. DT-empowered internal control and environmental information disclosure are vital to overcome GTMA challenges. Also, this prerequisite combination is affected by enterprise scale, state-owned, and R&D capabilities.