Does corporate eco-innovation affect stock price crash risk?. Issue 5 (September 2021)

• Record Type: Journal Article
• Authors: Zaman, Rashid; Atawnah, Nader; Haseeb, Muhammad; Nadeem, Muhammad; Irfan, Saadia
• Is Part Of: British accounting review. Volume 53:Issue 5(2021)
• Publication Date: 2021-09
• Subjects: Eco-innovation -- Stock price crash risk -- Information asymmetry -- Political leadership's ideology; M41; Accounting -- Periodicals; Accounting -- Great Britain -- Periodicals; Comptabilité -- Périodiques; Comptabilité -- Grande-Bretagne -- Périodiques; 657.05
• DOI: 10.1016/j.bar.2021.101031
• Languages: English
• ISSNs: 0890-8389

Abstract

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.