Are green firms more financially constrained? The sensitivity of investment to cash flow

Tommaso Oliviero (), Sandro Rondinella () and Alberto Zazzaro ()
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Sandro Rondinella: University of Calabria.

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: Green investment by private companies is essential to sustainable growth paths in the advanced economies. Whether, and to what extent, investments by green firms are hampered by lack of external finance is an open question. Here we estimate the sensitivity of investment to internal finance in firms engaging in green innovation, finding that the elasticity of investment to cash flow is four times less for green than for non-green firms. This result is stronger among smaller firms and robust to alternative definitions of “green firms.” Our findings indicate that green firms are less financially constrained, consistent with the growing perception of the importance of the green transition, which potentially affects financial investors outside the company.

Keywords: Green investment; cash flow; external finance; financial constraints. (search for similar items in EconPapers)
JEL-codes: E22 G30 Q55 (search for similar items in EconPapers)
Date: 2024-02-23
New Economics Papers: this item is included in nep-cfn, nep-ene, nep-env and nep-sbm
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Related works:
Working Paper: Are green firms more financially constrained? The sensitivity of investment to cash flow (2025)
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