Does green innovation increase enterprise value?

Abstract Using data from 3212 enterprises in China's A‐share market during the 2007–2018 period, this paper investigates the relationship between green innovation (GI) and enterprise value by using ordinary least squares (OLS) and two‐stage least squares (2SLS) regression. We find that for every 1% increase in the proportion of the number of the enterprise's green patent applications, the enterprise value (Tobin's Q) will increase by 0.023. Moreover, GI still has a positive lag effect on enterprise value after 2 to 6 years. However, the positive effect of GI on enterprise value may only exist in young non‐state‐owned enterprises. At the same time, GI has better performance in heavy pollution industries and non‐high‐tech industries. Moreover, we prove that the improvement of profitability may be a mechanism for GI to affect enterprise value, with a mediating effect accounting for 26.1% of the total effect. The finding on the causal relationship between GI and enterprise value in this study is of great significance for further understanding of the practical value of GI and has certain reference value for the formulation of incentive policies for different industries and enterprises.