Environmental engagement and stock price crash risk: Evidence from the European banking industry

Franco Fiordelisi, Ornella Ricci and Gianluca Santilli

International Review of Financial Analysis, 2023, vol. 88, issue C

Abstract: This paper investigates the impact of banks' environmental engagement on their future stock price crash risk. Given the strong commitment of European institutions towards a low carbon economy, we focus on European banks, which are expected to be crucial actors in driving this challenge. Using a sample of 447 bank-year observations across 22 European countries from 2015 to 2021, we find a negative relationship between banks' environmental engagement and future stock price crash risk, in accordance with the signalling theory, suggesting that a high level of environmental engagement corresponds to high ethical standards of bank managers and high levels of financial transparency.

Keywords: ESG; Environmental; Crash risk; Europe; Financial institutions (search for similar items in EconPapers)
JEL-codes: G14 G21 M14 N24 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:88:y:2023:i:c:s1057521923002053

DOI: 10.1016/j.irfa.2023.102689

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