Does corporate eco-innovation affect stock price crash risk?

Rashid Zaman, Nader Atawnah, Muhammad Haseeb, Muhammad Nadeem and Saadia Irfan

The British Accounting Review, 2021, vol. 53, issue 5

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 (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:53:y:2021:i:5:s0890838921000573

DOI: 10.1016/j.bar.2021.101031

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