Does corporate eco-innovation affect stock price crash risk?

Rashid Zaman, Nader Atawnah, Muhammad Haseeb, Muhammad Nadeem, Saadia Irfan

Research output: Contribution to journalArticlepeer-review

70 Citations (Scopus)


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.

Original languageEnglish
Article number101031
JournalBritish Accounting Review
Issue number5
Publication statusPublished - Sept 2021
Externally publishedYes


  • Eco-innovation
  • Information asymmetry
  • Political leadership's ideology
  • Stock price crash risk

ASJC Scopus subject areas

  • Accounting


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