I show that carbon pricing can hurt green technology innovation due to firm financial constraints. I identify green technologies from patent filings through textual analysis of patent claims and construct a novel dataset that links firm green patenting to ownership of carbon-emitting plants. Focusing on firms with high emissions in California, I show that the California cap-and-trade program exacerbates financial difficulties in already constrained firms, forcing them to reduce R&D and, subsequently, green innovation. These effects offset the positive impact of cap-and-trade on green innovation in unconstrained firms, rendering the program less effective in stimulating much-needed green innovation. The results suggest that carbon pricing forces constrained firms to value their short-term cash flows more than the long-term cash flows from transitioning to green technology. 

• FMA Asia/Pacific 2022, Hong Kong Joint Finance Research Workshop 2022, International Symposium on Environment and Energy Finance Issues 2023

Under the growing threat of patent trolls, high-tech firms face substantial legal fees, increased cash flow volatility, and greater expected costs of distress. I show that the exposure to patent litigation leads to overly conservative capital structures in high-tech firms. My identification exploits a 2017 U.S. Supreme Court decision limiting the ability of patent trolls to seek favorable venue outside the defendant’s incorporating state. Following the decision, firms incorporated in states with strong anti-patent troll laws increased leverage. Treatment effects are stronger for high-tech firms, the premier targets of patent trolls. Decreased cash flow volatility, especially in treated firms closer to financial distress, provides a key channel for my results.

• MFA 2021, SWFA 2021