Esg And Crash Risk: European Evidence

Abstract

This study investigates the influence of environmental, social, and governance (ESG) factors on stock price crash risk across a sample of 10 European countries from 2003 to 2021. The empirical findings demonstrate a negative correlation between crash risk levels and ESG elements. Moreover, this relationship remains robust even after incorporating various firm-specific control variables. Further analysis reveals that information asymmetry, financial constraints, market competition, and earnings management serve as transmission channels through which ESG factors impact stock price crash risk. By using European data, this research contributes to previous studies by initially analyzing how ESG is related to crash risk.