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.
| Original language | English |
|---|---|
| Article number | 101031 |
| Journal | British Accounting Review |
| Volume | 53 |
| Issue number | 5 |
| DOIs | |
| Publication status | Published - Sept 2021 |
| Externally published | Yes |
Keywords
- Eco-innovation
- Information asymmetry
- Political leadership's ideology
- Stock price crash risk
ASJC Scopus subject areas
- Accounting
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