TY - JOUR
T1 - Does corporate eco-innovation affect stock price crash risk?
AU - Zaman, Rashid
AU - Atawnah, Nader
AU - Haseeb, Muhammad
AU - Nadeem, Muhammad
AU - Irfan, Saadia
N1 - Publisher Copyright:
© 2021 The Authors
PY - 2021/9
Y1 - 2021/9
N2 - 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.
AB - 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.
KW - Eco-innovation
KW - Information asymmetry
KW - Political leadership's ideology
KW - Stock price crash risk
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U2 - 10.1016/j.bar.2021.101031
DO - 10.1016/j.bar.2021.101031
M3 - Article
AN - SCOPUS:85108947262
SN - 0890-8389
VL - 53
JO - British Accounting Review
JF - British Accounting Review
IS - 5
M1 - 101031
ER -