Green innovation and corporate default risk

Md Safiullah, Dinh Hoang Bach Phan and Md. Nurul Kabir

Journal of International Financial Markets, Institutions and Money, 2024, vol. 95, issue C

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.

Keywords: Green innovation; Default risk; Carbon emissions reduction (search for similar items in EconPapers)
JEL-codes: G14 G35 G51 M14 M41 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042443124001070
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:95:y:2024:i:c:s1042443124001070

DOI: 10.1016/j.intfin.2024.102041

Access Statistics for this article

Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

More articles in Journal of International Financial Markets, Institutions and Money from Elsevier
Bibliographic data for series maintained by Catherine Liu ().