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The Green Innovation Premium: Evidence from U.S. Patents and the Stock Market

Author

Listed:
  • Markus Leippold

    (University of Zurich; Swiss Finance Institute)

  • Tingyu Yu

    (University of Zurich)

Abstract

This paper investigates if firms’ green innovation efforts are reflected in their stock market prices. Firms with a higher proportion of green patents experience lower stock returns than those with a lower percentage. A long-short portfolio based on green patent shares has an average annual return of 8%, which remains significant when we control for common risk factors. However, firms with high green patent shares outperform their counterparts after events that increase climate concerns and strengthen environmental regulations. Moreover, firms with green innovation attract more institutional ownership and can weakly decrease their future carbon intensity and incident involvement.

Suggested Citation

  • Markus Leippold & Tingyu Yu, 2023. "The Green Innovation Premium: Evidence from U.S. Patents and the Stock Market," Swiss Finance Institute Research Paper Series 23-21, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2321
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    More about this item

    Keywords

    Green patents; cross-section of stock returns; event study; institutional investors;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation

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