Is corporate environmental investment a strategic risk management tool? Evidence from short selling threats

Yankun Zhou, Taijie Tang and Le Luo

Pacific-Basin Finance Journal, 2023, vol. 82, issue C

Abstract: This study examines whether corporate environmental investment is employed as a strategic management tool in response to short-selling threats. Using a difference-in-differences approach, we find that corporate environmental investment increases in response to short-selling threats in threatened firms. The impact is more pronounced for firms with greater financial opacity and lower institutional ownership, which is consistent with the risk management hypothesis. Furthermore, we document that companies tend to increase their environmental disclosure in complement to the increase in environmental investment. We also find significant increases in environmental voluntary over regulatory investment after the firms have been added to the short-selling list. Additional analysis suggests that environmental investment reduces overinvestment and investment inefficiency, and it is negatively associated with stock price crash risk.

Keywords: China; Environmental investment; Financial transparency; Institutional ownership; Risk management; Short-selling threats (search for similar items in EconPapers)
JEL-codes: G31 G38 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:82:y:2023:i:c:s0927538x23002007

DOI: 10.1016/j.pacfin.2023.102129

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