Does green technology innovation matter to the cost of equity capital?

• Published in: Research in international business and finance Vol. 62; p. 101735
• Main Authors: Elmawazini, Khaled, Chkir, Imed, Mrad, Fatma, Rjiba, Hatem
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.12.2022
• Subjects: Cost of equity capital, Patents Citations; Green technology innovation; G1; O3; Green technology innovation; G3; Cost of equity capital, Patents Citations
• ISSN: 0275-5319; 1878-3384
• DOI: 10.1016/j.ribaf.2022.101735

Using a panel of U.S. public firms, we present the first evidence highlighting the relation between green technology innovation and cost of equity capital. Consistent with our prediction, we find that greater green technology innovation is associated with lower cost of equity capital. Our results are statistically significant and economically important. Our findings are robust to a battery of sensitivity checks, including use of multiple estimation methods, alternative proxies of green innovation, various measures of cost of equity capital, and potential truncation problem. •Corporate innovation is a key determinant of firms’ cost of equity financing.•Higher green innovation intensity reduces the cost of equity capital.•Results are robust to the use of various proxies of green innovation and cost of equity, and potential truncation problem.