The impact of innovation on the relationship between carbon emission and firm value

Abstract

The climate-change risk coupled with the increased greenhouse gas (GHG) emission has confronted firms and their managers with an increasing pressure to reduce their emissions. To contribute to the debate whether it pays to reduce GHG emissions, this thesis investigates the relationship between carbon emission and firm value by taking the possible moderating effect of innovation into account. A panel data set consisting out of 1,681 firms over the time period 2014 until 2019 is used. To test this relationship, this thesis takes three perspectives of innovation into account: the firm-level, industry-level and country-level. Results out of the analysis show significant mixed results for the moderating effect. On a firm-level a strengthening effect is found, where on an industry-level a weakening effect and on a country-level an insignificant effect is found. The conclusion that can be derived from this analysis is that a negative relationship between carbon emission and firm value persist, but the direction of the moderating effect of innovation remains unclear.