Work

Environmental risk and stock price crash risk: Evidence from energy substitution policy adoption

Year: 2025

Type: article

Abstract: Exploring the staggered adoption of energy substitution policy, we investigate the relationship between reduced environmental risk and stock price crash risk. The result shows that stock price crash risk decreases following the policy's passage. Moreover, firms disclose more environmental information (specifically, hard information) following the policy and the policy's effect on crash risk is stronger for firms with higher information asymmetry. These findings are consistent with signaling theory, i.e., reduced environmental risk increases environmental information disclosure, leading to a lower stock price crash risk. Overall, this paper suggests that reduced environmental risk plays a crucial role in decreasing crash risk, providing empirical support for adopting clean energy.

Source: International Review of Economics & Finance

DOI: 10.1016/j.iref.2025.103977

Authors: Sen Li, Yi Zhang

Institutions: Huangshan University, Southwestern University of Finance and Economics

Language: English

Topic: Corporate Social Responsibility Reporting

Subfield: Strategy and Management

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Climate action

Open Access status: gold

Estimated APC paid: $1,930