This study explores the influence of U.S. Environmental Protection Agency (EPA) enforcement on corporate green innovation, as measured by green patent counts and citations. Our findings show that EPA-enforced firms experience a substantial uptick in green innovation outputs. This boost can be attributed to enhanced green innovation efficiency and increased hiring of green inventors. Moreover, this effect is more pronounced for firms headquartered in states with stronger environmental enforcement intensity, firms with higher institutional ownership, and firms with fewer financial constraints. Finally, we find that green innovations help enforced firms avoid future EPA enforcements and reduce toxic chemical releases. Taken together, these results imply that EPA enforcement actions can indeed foster positive impacts on corporate green innovation.

We extract information from earnings call transcripts to develop a comprehensive and reliable measure of labor shortage exposure. After validating the measure at the state, industry, and firm levels, we show that firms with labor shortage exposures experience lower earnings call CARs, future stock returns and operating performance. Firms respond to labor shortages by substituting labor with capital and R&D investments, and by producing more production-process patents. Such responses help mitigate the negative effects on future performance. Our measure has broad applicability, and our findings provide new insight into labor-capital substitution in imperfectly competitive labor markets.