Does corporate eco-innovation affect stock price crash risk?

Document Type

Article

Publication Date

9-1-2021

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

Publication Title

British Accounting Review

Divisions

Faculty_of_Business_and_Accountancy

Volume

53

Issue

5

Publisher

Elsevier Science Ltd

Publisher Location

THE BOULEVARD, LANGFORD LANE, KIDLINGTON, OXFORD OX5 1GB, OXON, ENGLAND

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