Stock Market Reaction to Green Vehicle Innovation

We study the stock market reaction to announcements of global green vehicle innovation over a 14-year time span (1996 to 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. We also find that these results hold when controlling for firm size, leverage, profitability, R&D intensity, and oil price changes