Abstract
We examine the effect of corporate environmental innovation (hereafter eco-innovation) on stock price crash risk and document a significant negative association. Utilising a large sample of publicly listed U.S. firms for the period 2003 to 2017, we find that an increase in eco-innovation from the 25th to the 75th percentile is associated with 17.62% reduction in stock price crash risk. This outcome remains robust to a variety of sensitivity tests and after accounting for potential endogeneity concerns. Eco-innovative firms attract more institutional investors and equity analyst following and disclose more information leading to lower stock price crash risk. Additional tests reveal that the negative effect of eco-innovation is contingent on the political leadership's ideology and environmental sensitivity. Our paper contributes to the ongoing discourse on the costs and benefits of eco-innovation, documenting the value-enhancing perspective of eco-innovation.
Keywords
Eco-innovation, stock price crash risk, information asymmetry, political leadership's ideology
Document Type
Journal Article
Date of Publication
2021
Publication Title
The British Accounting Review
Publisher
Elsevier
School
School of Business and Law
RAS ID
36038
Funders
Edith Cowan University - Open Access Support Scheme 2021
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.
Included in
Accounting Commons, Finance and Financial Management Commons, Technology and Innovation Commons
Comments
Zaman, R., Atawnah, N., Haseeb, M., Nadeem, M., & Irfan, S. (2021). Does corporate eco-innovation affect stock price crash risk?. The British Accounting Review, 53(5), Article 101031. https://doi.org/10.1016/j.bar.2021.101031