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Reputational Risk: An Investigation Into How Environmental Failures Drive Stock Price Crashes

Author

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  • Man Dang
  • Premkanth Puwanenthiren
  • Edward Jones
  • Hoang Long Phan
  • Abdelhafid Benamraoui

Abstract

The study examines the relationship between stock price crashes and firm environment reputational risk. Using a large sample of US listed firms, covering a time span from 2007 to 2021, we test the effect of environmental reputation risk on three measures for the stock price crash risk (NEGCSK, DRUV, and CRASH). The findings reveal a strong positive relationship between stock price crash risk and environmental reputation risk. The relationship is more pronounced in firms with weaker governance, less concentrated industries, and subject to corporate cultures that lack innovation. The study contributes to the literature linking corporate environmental approach or strategy and financial markets, emphasizing the importance of green reputation in firms' strategy to protect shareholder value and to promote long‐term sustainability.

Suggested Citation

  • Man Dang & Premkanth Puwanenthiren & Edward Jones & Hoang Long Phan & Abdelhafid Benamraoui, 2026. "Reputational Risk: An Investigation Into How Environmental Failures Drive Stock Price Crashes," Business Strategy and the Environment, Wiley Blackwell, vol. 35(4), pages 5987-6008, May.
    • Handle: RePEc:bla:bstrat:v:35:y:2026:i:4:p:5987-6008
    DOI: 10.1002/bse.70466
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