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Does green activity impact stock price crash risk? The role of climate risk

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  • Nguyen, Dat Thanh
  • Tran, Vuong Thao
  • Phan, Dinh Hoang Bach

Abstract

We investigate the effect of corporate green activity on the stock price crash risk. Using 2,222 US companies from 2002 to 2021, we find solid evidence that green activity is significantly related to lower firms’ price crash risk. Economically, a firm's price crash risk is reduced by 31.8% - 42.9% for participating in green activities. Moreover, the empirical results show that this negative effect is more substantial during high-climate risk periods. Our findings remain unchanged after controlling for endogeneity issues and several robustness tests.

Suggested Citation

  • Nguyen, Dat Thanh & Tran, Vuong Thao & Phan, Dinh Hoang Bach, 2023. "Does green activity impact stock price crash risk? The role of climate risk," Finance Research Letters, Elsevier, vol. 55(PA).
    • Handle: RePEc:eee:finlet:v:55:y:2023:i:pa:s1544612323002519
    DOI: 10.1016/j.frl.2023.103879
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    More about this item

    Keywords

    Green activity; Price crash risk; Climate risk;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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