Green Innovation And Stock Price Crash Risk

Abstract

This study investigates the relationship between green innovation and stock price crash risk for U.S. firms from 1976 to 2018. The findings indicate a positive correlation between green innovation and the probability of a stock market collapse, using the number of green patents as a proxy for green innovation. This result demonstrates that implementing green innovation strategies increases a firm's susceptibility to stock price crashes. Further examination reveals that companies with substantial information asymmetry, strict budgetary limitations, poor corporate social responsibility, or CEOs who take risks are more likely to have a positive correlation between green innovation and crash risk. Taken together, this study contributes to the extant literature by providing the first empirical evidence on the link between green innovation and stock price crash risk utilizing a large sample of U.S. firms. The findings draw attention to the unexpected effects that green innovation initiatives may have on a company's stock price crash risk, which has significant ramifications for managers, investors, and legislators