Corporate green innovation and stock price non-synchronicity: Evidence from China

Abstract

Leveraging a large sample of publicly listed companies in China from 2012 to 2021, the present study investigates the impact of corporate green innovation on stock price synchronicity. We provide compelling evidence that green innovation facilitates the incorporation of firm-specific information into stock prices, measured by idiosyncratic volatility. In addition, we find that analyst coverage and institutional ownership are two possible economic mechanisms underlying the relationship we identified. The price efficiency implications of corporate green innovation are more evident among small firms, manufacturing firms, and firms with weak corporate governance. Our key findings are robust to a battery of identification strategies. Overall, our study sheds light on the unintended consequences of corporate green innovation (i.e., stock price informativeness), thereby enriching the literature on green innovation and stock price efficiency.