Green innovation and firms’ financial and environmental performance: The roles of pollution prevention versus control

Author

Qiang Cheng, Singapore Management UniversityFollow
An-Ping LIN, Singapore Management UniversityFollow
Mengjie YANG, Monash University

Publication Type

Journal Article

Version

publishedVersion

Publication Date

2-2025

Abstract

This study examines the effects of firms' green innovation on their future financial and environmental performance. If pollution is primarily a manifestation of wasted resources, then investments in pollution prevention technologies can both reduce the environmental impact of production and improve financial performance. In contrast, investments in pollution control technologies likely reduce the environmental impact of production without improving financial performance. Using green patents to capture firms' investments in these two types of technologies, we find that the value of a firm's pollution prevention patents is positively associated with its future financial and environmental performance, and that the positive impact on future financial performance is achieved through improvements in sales growth and cost efficiency. In contrast, the value of a firm's pollution control patents is not associated with its future financial or environmental performance. Overall, these findings shed light on the future implications of green innovation.

Keywords

Environmental performance, Financial performance, Green innovation, Pollution control patents, Pollution prevention patents

Discipline

Accounting | Corporate Finance | Technology and Innovation

Research Areas

Corporate Reporting and Disclosure

Publication

Journal of Accounting and Economics

Volume

79

Issue

1

First Page

1

ISSN

0165-4101

Identifier

10.1016/j.jacceco.2024.101706

Publisher

Elsevier

Embargo Period

4-1-2025

Citation

Cheng, Qiang; LIN, An-Ping; and YANG, Mengjie. Green innovation and firms’ financial and environmental performance: The roles of pollution prevention versus control. (2025). Journal of Accounting and Economics. 79, (1), 1.
Available at: https://ink.library.smu.edu.sg/soa_research/2075

Copyright Owner and License

Authors

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Additional URL

https://doi.org/10.1016/j.jacceco.2024.101706