Do Firms Get High? The Impact of Marijuana Legalization on Firm Performance, Corporate Innovation, and Entrepreneurial Activity

Posted: 16 Jan 2020

See all articles by Jue Wang

Jue Wang

University of Iowa - Department of Finance

Shagun Pant

University of Iowa - Department of Finance

Tong Yao

University of Iowa - Henry B. Tippie College of Business

Date Written: June 25, 2019

Abstract

We find that state-level marijuana legalization has a positive financial impact on firms, likely by affecting firms’ human capital. Firms headquartered in marijuana-legalizing states receive higher market valuations, earn higher abnormal stock returns, improve employee productivity, and increase innovation. Exploiting firm level inventor data, we directly test the human capital channel and find that post legalization, firms retain inventors that become more productive and recruit more innovative talents from out of state. We also find that marijuana-legalizing states experience an increase in the number of new startups and venture capital investments.

Suggested Citation

Wang, Jue and Pant, Shagun and Yao, Tong, Do Firms Get High? The Impact of Marijuana Legalization on Firm Performance, Corporate Innovation, and Entrepreneurial Activity (June 25, 2019). Available at SSRN: https://ssrn.com/abstract=3511872

Jue Wang

University of Iowa - Department of Finance ( email )

Iowa City, IA 52242-1000
United States

Shagun Pant (Contact Author)

University of Iowa - Department of Finance ( email )

Iowa City, IA 52242-1000
United States

Tong Yao

University of Iowa - Henry B. Tippie College of Business ( email )

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