Green innovation and heavily polluting firms’ stock market value

This paper introduces a moderated-mediated model to investigate the relationship between green innovation, as measured by green patent stocks, and firms’ stock market value, as measured by Tobin’s Q. Using longitudinal data drawn from 351 heavily polluting firms in China's A-share market from 2007 to 2018, we find that green innovation is likely to affect firms’ stock market value positively. A 1% increase in the green innovation over assets index will enhance by 0.18% Tobin’ Q at the firm level. Environmental compliance costs significantly mediate the green innovation-firms’ stock market value association. We also emphasize the role of technological collaboration with public research organizations which will have a significant positive moderating effect on green innovation-environmental compliance costs linkage. Our results suggest that the recurrent question in the extant literature, “does it pay to be green?” should be substituted by “how and under what conditions does it pay to be green for firms?” Implications for firms and policymakers are also proposed.