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Unintended consequences of punishment: Adverse effects of environmental penalties on green patents

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  • Tian, George Zhe
  • Yae, James

Abstract

We find that manufacturing firms that have received high environmental penalties experience significant declines in subsequent green patenting activity. We further use a difference-in-differences strategy exploiting the passage of 1990 Clean Air Act Amendment (1990 CAAA) as a shock to environmental regulatory stringency and show that the increase in regulatory stringency is linked to decreases in corporate green innovation. The adverse effect of environmental penalties on green innovation is stronger in firms with greater business uncertainty, higher product market competition, higher institutional ownership, and weaker financial conditions. Overall, the empirical evidence is consistent with the view that environmental penalties prompt firms to manage their risk exposure by reducing green innovation activity.

Suggested Citation

  • Tian, George Zhe & Yae, James, 2024. "Unintended consequences of punishment: Adverse effects of environmental penalties on green patents," Research in International Business and Finance, Elsevier, vol. 70(PA).
    • Handle: RePEc:eee:riibaf:v:70:y:2024:i:pa:s0275531924000746
    DOI: 10.1016/j.ribaf.2024.102281
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    More about this item

    Keywords

    Green innovation; Environmental penalties; Environmental regulatory risk;
    All these keywords.

    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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