Green innovation and corporate default risk
Year: 2024
Type: article
Abstract: We investigate the impact of green innovation on default risk for the period 2003–2020. Using 15,015 firm-year observations from 2301 unique U.S. firms and a firm-fixed effects regression model, we find that firms with higher green-innovation experience lower default risk as measured by the distance-to-default, probability of default, and CDS spreads. We find robust evidence addressing potential endogeneity in the association between green innovation and default risk by applying three different approaches: the propensity score matching approach, the instrumental variable approach, and the difference-in-differences technique. Our channel analysis results show that high green innovation reduces cashflow volatility and managerial risk-taking, which translates into lower default risk. The influence of green innovation on default risks is contingent on various firm characteristics. It is more pronounced in firms with greater institutional ownership, a younger age, and more carbon-intensive operations.
Source: Figshare
DOI: 10.26181/26982946
Authors: Safiullah, Md, Phan, Dinh, Kabir, Md Nurul
Institution: La Trobe University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W6965020585
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