Gustav Martinsson, Professor of Finance

Gustav Martinsson

Professor of Finance

Photo: Johanna Säll

Professor of Finance, Stockholm University (SU)

Visiting Researcher, Swedish House of Finance (SHoF)

Affiliated Researcher, House of Sustainable Society (HoSS)

PUBLICATIONS

[11] Payout Taxes Matter: The Financing R&D Mechanism

Accepted, Management Science.

with James R. Brown

Higher taxes on corporate payouts increase the cost of financing with stock issues. As a result, corporate investments that rely on external equity financing should be particularly sensitive to payout tax rates. A large literature shows that firms rely extensively on stock issues to fund R&D, suggesting that the financing of R&D is a potentially important micro-level mechanism linking payout taxation with real corporate activity. We document a robust negative association between dividend tax rates and firm R&D investment in a broad sample of OECD countries between 2000 and 2019. The negative relation between dividend taxes and R&D is concentrated in equity-dependent firms in high R&D industries. R&D is more sensitive to dividend tax rates in countries with stock market based financial systems. Dividend taxes are less important for investment in physical capital than for R&D. Higher dividend taxes are associated with less corporate financing with stock issues, particularly in firms with low internal cash flow. Our study highlights the importance of focusing on equity-dependent activities and firms to evaluate the real consequences of payout taxation.

[10] The Effect of Carbon Pricing on Firm Emissions: Evidence from the Swedish CO2 Tax

Review of Financial Studies, Vol. 37 (2024), pp. 1848–1886.

Highly Commended Financial Times Responsible Business Education Award 2025.

Non-technical summary: Swedish House of Finance and Stockholm University.

with Laszlo Sajtos, Per Strömberg, and Christian Thomann.

Sweden was one of the first countries to introduce a carbon tax in 1991. We assemble a unique dataset tracking CO2 emissions from Swedish manufacturing firms over 26 years to estimate the impact of carbon pricing on firm-level emission intensities. We estimate an emission-to-pricing elasticity of around two, albeit with substantial heterogeneity across subsectors and firms, where higher abatement costs and tighter financial constraints are associated with lower elasticities. A simple calibration suggests that 2015 CO2 emissions from Swedish manufacturing would have been roughly 30% higher without carbon pricing.

[9] The Growth of Finance is Not Remarkable

with James R. Brown and Bruce C. Petersen

Journal of Financial and Quantitative Analysis, Vol. 58 (2023), pp. 2553–2578.

Non-technical summary: Cato Institute and Swedish House of Finance.

We show that the finance income share closely tracks the income share of other high-skill service industries throughout the 20th century. And, overall, finance grows slower than the rest of the high-skill service sector. The finance share of high-skill service income has also fallen in most European economies over the past 50 years. The rise of modern finance is not nearly as unique or remarkable as prior research suggests.

[8] Can Environmental Policy Encourage Technical Change? Emissions Taxes and R&D Investment in Polluting Firms

with James R. Brown and Christian Thomann

Review of Financial Studies, Vol. 35 (2022), pp. 4518–4560.

Runner-up in Financial Times Responsible Business Education Award 2023.

Non-technical summary: KTH , MISUM and Swedish House of Finance.

Higher country taxes on noxious manufacturing emissions lead to substantial increases in firm R&D spending. The R&D response is driven entirely by the high-pollution firms most affected by emissions taxes. Pollution taxes increase the marginal value of R&D spending in polluting firms, even when this spending does not lead to new innovation. Pollution taxes have the strongest effect on R&D investment in sectors where new invention is harder to appropriate and outside knowledge is easier to acquire, suggesting an important reason dirty firms invest in R&D is to expand their capacity to absorb external knowledge and technical know-how.

[7] Government Lending in a Crisis

with James R. Brown and Christian Thomann

Journal of Corporate Finance, Vol. 71 (2021), 102116.

Non-technical summary: Swedish House of Finance.

Swedish National Audit Office based their evaluation of the COVID-19 tax deferral program on our methodology (I was also the scientific reviewer of the report). Summary of project and report here.

Interview: Swedish House of Finance.

The economic disruption from the COVID-19 pandemic prompted governments around the world to initiate an unprecedented number of temporary lending and tax deferment programs. Which firms will benefit from these programs? What are the implications for firm balance sheets and post-crisis survival? We provide some novel insights on these questions by studying one of the first government programs of this type, which Sweden launched at the height of the 2008–2009 financial crisis. The Swedish program allowed firms to temporarily suspend payment of all labor-related taxes and fees, treating these deferred amounts as a short-term loan from the government. Firms participating in the program are younger, less profitable, hold fewer cash reserves, are more leveraged, and have less unused slack in their credit lines when the crisis hits. Given the structure of the Swedish program, it provided more liquidity to firms with relatively larger ex ante wage bills. Exploiting this feature of the policy, we find that firms use the program to increase overall debt levels rather than to substitute for other borrowing. The leverage increase is due entirely to higher levels of non-bank debt. Firms use the funds to avoid making even deeper cuts to current assets. Despite the increase in leverage, access to the lending program is unrelated to the likelihood a firm files for bankruptcy and is negatively related to the likelihood a firm encounters severe financial distress in the years immediately following the crisis.

[6] Does Transparency Stifle or Facilitate Innovation?

with James R. Brown

Management Science, Vol. 65 (2019), pp. 1600–1623.

Corporate transparency reduces information asymmetries between firms and capital markets, but increases the costs associated with information leakage to competitors. We document significantly higher rates of R&D and patenting in richer information environments. In contrast, transparency has no impact on physical capital accumulation, consistent with fewer information asymmetries in tangible assets.

[5] What Promotes R&D? Comparative Evidence from Around the World

with James R. Brown and Bruce C. Petersen

Research Policy, Vol. 46 (2017), pp. 447–462.

We find that financial market rules that improve accounting standards and strengthen contract enforcement share a significant positive relation with R&D in more innovative industries, as do stronger legal protections for intellectual property. In contrast, stronger creditor rights and more generous R&D tax credits have a negative differential relation with R&D in more innovative industries.

[4] Stock Markets, Credit Markets, and Technology-Led Growth

with James R. Brown and Bruce C. Petersen

Journal of Financial Intermediation, Vol. 32 (2017), pp. 45–59.

We document a strong positive relation between the initial size of the country's high-tech sector and subsequent rates of GDP and total factor productivity growth. We also find a strong positive connection between a country's equity (but not credit) market development and the size of its high-tech sector. Stock markets are uniquely suited for financing technology-led growth, a particularly important concern for advanced economies.

[3] Law, Stock Markets, and Innovation

with James R. Brown and Bruce C. Petersen

Journal of Finance, Vol. 68 (2013), pp. 1517–1549.

Reprinted in Finance and Growth, The International Library of Critical Writings in Economics series, Asli Demirgüc-Kunt and Ross Levine (Editors), 2018.

Internet Appendix

We study a broad sample of firms across 32 countries and find that strong shareholder protections and better access to stock market financing lead to substantially higher long‐run rates of R&D investment, particularly in small firms, but are unimportant for fixed capital investment. Credit market development has a modest impact on fixed investment but no impact on R&D.

[2] Do Financing Constraints Matter for R&D?

with James R. Brown and Bruce C. Petersen

European Economic Review, Vol. 56 (2012), pp. 1512–1529.

Existing evidence on whether financing constraints limit R&D is decidedly mixed, particularly in the studies of non-U.S. firms. However, we find strong evidence that the availability of finance matters for R&D once we directly control for: (i) firm efforts to smooth R&D with cash reserves and (ii) firm use of external equity finance.

[1] Equity Financing and Innovation: Is Europe Different from the United States?

Journal of Banking and Finance, Vol. 34 (2010), pp. 1215–1224.

This paper examines whether R&D spending in Europe in a similar way was sensitive to fluctuations in the supply of internal and external equity during the late 1990s and early 2000s. I estimate dynamic R&D regression models for UK and Continental European high-tech firms separately and find significant joint cash-flow effects for newly listed firms in both samples. However, only new firms in the UK experienced a joint external equity effect as well.

WORKING PAPERS

[12] Decarbonizing without Clean Technology: Lessons from the Trucking Industry

with Per Strömberg, and Christian Thomann.

In order to limit the costs of climate change, green-house gas emissions need to be dramatically reduced in the short run. But is it possible for high-emitting sectors to decarbonize even though viable clean technology alternatives are not yet available? We study the Swedish trucking industry over 2007–2020, when a biofuel blending scheme sharply raised diesel costs. Because heavy trucks had no economically viable alternatives to diesel, trucking firms would have to rely on organizational and business model changes to reduce fuel costs. Using comprehensive vehicle- and firm-level data, we show that CO2 emissions from trucking decreased by 5% while transportation output increased by 23% over our sample period. Large firms raised productivity, lowered emission intensity, and gained market share. In contrast, small firms experienced higher exit rates and a decreasing market share. Our evidence indicates that logistics was the main driver of large-firm productivity gains. Decarbonization thus operated mainly through organizational adaptation rather than a switch to green and/or energy-saving technology. Our results show that even in a hard-to-abate sector without short-run green technology alternatives, emissions can be reduced without sacrificing economic efficiency.

[13] Carbon Pricing and Investment

with James R. Brown, Per Strömberg, and Christian Thomann.

How does carbon pricing affect investment in brown firms? During the period 2000-2019, the effective cost of emitting carbon rose by about 400 percent for Swedish manufacturing firms. Despite lower operating margins, high-emission firms significantly increased both total capital investment and the share of investment dedicated to abatement. The response is concentrated among firms with strong internal financial capacity. We find no comparable investment increase in lower-emitting firms or in high-emission industries outside of Sweden. Our results show that pricing CO2 emissions at a sufficiently high level can incentivize brown firms to make green investments.

OTHER PEER REVIEW PUBLICATIONS

Klimatpolitik och effektivitet. Lärdomar från åkerinäringen

with Per Strömberg and Christian Thomann

SNS Analys 110 (2025)

Hur påverkas företags utsläpp av ett pris på koldioxid? En longitudinell studie över ett kvarts sekel

with Per Strömberg

SNS Analys 68 (2020)

Svensk koldioxidskatt, 1991-2017

with Mathias Fridahl

Fores Policy Brief 2018:3 (2018): link

Reply: Financialization impedes climate change mitigation: Evidence from the early American solar industry

eLetter, Science Advances (2018): link