Corporate Governance and Green Innovation
52 Pages Posted: 13 Feb 2013 Last revised: 11 Nov 2015
Date Written: November 11, 2015
We study the relationship between corporate governance and firms’ environmental innovation. Exploiting changes in antitakeover legislation in the US, we show that worse governed firms generate fewer green patents relative to all their innovations. This negative effect is greater for firms with a smaller share of institutional ownership, with a smaller stock of green patents, and with more binding financial constraints. Investigating regulatory and industry variations, we also find more pronounced effects for firms operating in states with lower pollution abatement costs, and in sectors less dependent on energy inputs. Overall, our results suggest that ineffective corporate governance may constitute a major obstacle to environmental efficiency.
Keywords: corporate governance, environment, green innovation, patents
JEL Classification: G34, O31, Q20, Q55
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