Carbon neutrality policies and stock price crash risk: Evidence from China

Daoping Wang, Zhanghanyu Ji and Xinyan Shen

Finance Research Letters, 2025, vol. 81, issue C

Abstract: This study investigates the impact of carbon neutrality policies on firm stock price crash risk, based on data of China. Findings reveal that carbon neutrality policies significantly reduce crash risk, with this effect mediated by both carbon emission reductions and alleviation of financing constraints. Moreover, heterogeneity analysis demonstrates that the relationship between carbon neutrality policies and firm stock price crash risk is only significant for firms in low-carbon-emissions industries or firms with low ESG performance and high information transparency. Also, carbon neutrality policies can reduce the risk of stock price crashes only when investor sentiment is low.

Keywords: Carbon neutrality policies; Stock price crash risk; Esg performance; Carbon emissions; Financial constraints (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325006920

DOI: 10.1016/j.frl.2025.107432

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