We investigate potential mechanisms through which market-wide sentiment affects firms' innovation activities. We provide evidence for the financing channel by showing that financially constrained firms are more likely to issue equity and invest more in research and development (R&D) than...

This paper analyses the effect of mandatory pollution abatement on U.S. corporate investment and performance and shows that environmental regulation can stimulate investment in innovation. The following set of theoretical and empirical results are presented. For financially unconstrained firms,...