Green governance and stock price crash risk: Evidence from China

Abstract

This study examines whether and how green governance affects stock price crash risk using a large sample of Chinese listed firms from 2010 to 2021. The results show that stock price crash risk is negatively affected by corporate green governance level. Cross-sectional analyses suggest that the decreasing impact of green governance on crash risk is more pronounced for firms with weak external supervision, high risk-taking degree, fewer female directors, and facing stronger environmental regulation. Moreover, information transparency and corporate reputation are two underlying channels through which green governance impacts crash risk. Our findings also hold after several robustness checks including sample intervals change, and alternative variable measurement, propensity score matching, instrumental variables, and Heckman two-step method.