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
Divisions
Faculty_of_Business_and_Accountancy
Publication Title
British Accounting Review
Volume
53
Issue
5
Publisher
Elsevier Science Ltd
Publisher Location
THE BOULEVARD, LANGFORD LANE, KIDLINGTON, OXFORD OX5 1GB, OXON, ENGLAND