Environmental law enforcement as external monitoring: Evidence from the impact of an environmental inspection program on firm-level stock price crash risk
Jianhua Tan and
Kam C. Chan
International Review of Economics & Finance, 2021, vol. 71, issue C, 21-31
Leveraging from the recent reform in the China’s new environmental inspector program (NEIP) as a natural experiment, we document that firms located in NEIP cities having lower future stock price crash risk than those located in non-NEIP cities. The findings are consistent with the notion that firms disclose more negative news when subject to enhanced environmental monitoring leading to a lower future stock price crash risk. Hence, environmental law enforcement has a deterrent effect on firms and making them more transparent. Overall, besides the impact on environment, environment law enforcement brings unintended positive effects on firm-level governance.
Keywords: Environmental law enforcement; External monitoring; Crash risk (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:71:y:2021:i:c:p:21-31
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