ABSTRACT Adopting a signaling perspective, this study examines whether corporate green patenting reduces the cost of equity by mitigating information asymmetry in capital markets. Using longitudinal panel data from South Korea, we find that green patenting—encapsulating technological innovation related to energy, environmental protection, and climate change—is associated with a significantly lower cost of equity. Furthermore, this effect is more pronounced for firms with higher energy consumption and carbon intensity. Channel analyses further indicate that reductions in information asymmetry constitute an important mechanism linking green patenting to lower equity financing costs. The results collectively suggest that green patenting plays a meaningful role in alleviating capital market uncertainty, particularly for firms facing elevated transition risks due to carbon‐ and energy‐intensive operations. Our findings offer managerial and policy implications by highlighting the importance of green innovation in improving financing conditions and strengthening corporate competitiveness during the transition toward a low‐carbon economy.
Yim et al. (Mon,) studied this question.