Green Commitment and Stock Prick Crash Risk

Liu, PH; Wang, Y; Xue, DR; Linnenluecke, PM; Cai, DCW

Green Commitment and Stock Prick Crash Risk

Liu, PH Wang, Y Xue, DR Linnenluecke, PM Cai, DCW

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Publisher:: ACADEMIC PRESS INC ELSEVIER SCIENCE
Publication Type:: Journal Article
Citation:: Finance Research Letters, 2022, 47
Issue Date:: 2022-06-01

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Field	Value	Language
dc.contributor.author	Liu, PH
dc.contributor.author	Wang, Y
dc.contributor.author	Xue, DR
dc.contributor.author	Linnenluecke, PM
dc.contributor.author	Cai, DCW
dc.date.accessioned	2023-01-05T00:20:57Z
dc.date.available	2023-01-05T00:20:57Z
dc.date.issued	2022-06-01
dc.identifier.citation	Finance Research Letters, 2022, 47
dc.identifier.issn	1544-6123
dc.identifier.issn	1544-6131
dc.identifier.uri	http://hdl.handle.net/10453/164702
dc.description.abstract	The information obfuscation hypothesis states that managers use corporate green practices intentionally to obfuscate or disguise negative information and environmental misbehaviour to extract rents for personal career concerns. In contrast, signalling theory suggests that green-oriented firms deliver a positive signal to the market, favouring “green” investors. Such pro-environmental signals ultimately translate into enhanced financial performance and reduced risk of a price crash. Using Chinese listed firms as the research setting, we further investigate the relationship between corporate green commitment and stock price crash risk. The results show that solid green commitment significantly reduces stock price crash risk. The effect is more pronounced in non-state-owned firms and when the stock market is in a downturn. We also find mediating effects of external governance by institutional investors and media that transmit the impact of green commitment onto price crash risk. Our findings have important implications for corporate resilience against unexpected crises.
dc.language	English
dc.publisher	ACADEMIC PRESS INC ELSEVIER SCIENCE
dc.relation.ispartof	Finance Research Letters
dc.relation.isbasedon	10.1016/j.frl.2021.102646
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	1502 Banking, Finance and Investment
dc.subject.classification	Finance
dc.title	Green Commitment and Stock Prick Crash Risk
dc.type	Journal Article
utslib.citation.volume	47
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access	*
dc.date.updated	2023-01-05T00:20:54Z
pubs.publication-status	Published
pubs.volume	47

Abstract:

The information obfuscation hypothesis states that managers use corporate green practices intentionally to obfuscate or disguise negative information and environmental misbehaviour to extract rents for personal career concerns. In contrast, signalling theory suggests that green-oriented firms deliver a positive signal to the market, favouring “green” investors. Such pro-environmental signals ultimately translate into enhanced financial performance and reduced risk of a price crash. Using Chinese listed firms as the research setting, we further investigate the relationship between corporate green commitment and stock price crash risk. The results show that solid green commitment significantly reduces stock price crash risk. The effect is more pronounced in non-state-owned firms and when the stock market is in a downturn. We also find mediating effects of external governance by institutional investors and media that transmit the impact of green commitment onto price crash risk. Our findings have important implications for corporate resilience against unexpected crises.

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http://hdl.handle.net/10453/164702