Stock Market Reaction to Green Vehicle Innovation

Abstract

We study the stock market reaction to announcements of global green vehicle innovation over a 14‐year time span (1996–2009) using the event study methodology. We document that the stock market generally reacts positively to automakers' announcements of environmental innovations, consistent with prior research on the wealth effects of innovation announcements. Our results indicate that crucial green product development decisions such as innovation type and market segment choices exert direct influence on a firm's market value. These results hold after controlling for firm size, leverage, profitability, R&D intensity, and oil price changes.