The real effects of long-term stock price informativeness: evidence from green innovation in China

This study examines whether long-term stock price informativeness affects corporate green innovation among Chinese A-share listed firms from 2005 to 2022. We use a market microstructure measure that separates information about long-term fundamentals from short-term signals and noise. Higher long-term stock price informativeness is associated with more green patent applications. Instrumental-variable estimates based on annual-report readability and exposure to the 2015 pension fund reform support this finding. The result also holds for green invention patent applications, a more substantive category of green patents. Mechanism tests are consistent with managerial learning from stock prices and monitoring by patient capital. These findings show that long-term stock price informativeness can affect firms' real decisions and support green innovation in an emerging market.