Does Carbon Risk Influence Stock Price Crash Risk? International Evidence

Posted: 12 Jul 2021 Last revised: 25 May 2022

See all articles by Sudipta Bose

Sudipta Bose

Discipline of Accounting and Finance, Newcastle Business School, The University of Newcastle, Australia

Edwin Lim

Deakin University - Department of Accounting

Kristina Minnick

Bentley University

Patrick J. Schorno

KPMG, USA

Syed Shams

University of Southern Queensland

Multiple version iconThere are 2 versions of this paper

Date Written: July 8, 2021

Abstract

We examine the association between carbon risk and future stock price crash risk and the moderating role of climate change disclosures in this association using a sample of firms across the world. We find that carbon risk is positively associated with future stock price crash risk, and firm-level climate-change disclosures attenuate the positive effect of carbon risk on future stock price crash risk. Our findings are robust using quasi-experimental analysis. We also find that the positive association between carbon risk and future stock price crash risk is attenuated by internal (e.g., corporate governance) and external monitoring (e.g., institutional investors and financial analysts). Further analysis shows that the positive association between carbon risk and stock price crash risk is less pronounced for firms linking climate-related issues with incentives contracts and firms in countries with higher stakeholder orientation, climate change performance and financial transparency. There is a broader implication for our research findings, given that carbon risks and climate change are getting impetus across the world.

Keywords: Carbon risk, Climate change disclosures, Stock price crash risk, Cross-country

JEL Classification: D82; M14; M41; Q54

Suggested Citation

Bose, Sudipta and Lim, Edwin and Minnick, Kristina and Schorno, Patrick J. and Shams, Syed, Does Carbon Risk Influence Stock Price Crash Risk? International Evidence (July 8, 2021). Available at SSRN: https://ssrn.com/abstract=3882531

Sudipta Bose (Contact Author)

Discipline of Accounting and Finance, Newcastle Business School, The University of Newcastle, Australia ( email )

Sydney
Australia

HOME PAGE: http://www.newcastle.edu.au/profile/sudipta-bose

Edwin Lim

Deakin University - Department of Accounting ( email )

Australia

Kristina Minnick

Bentley University ( email )

175 Forest Street
Waltham, MA 02154
United States

HOME PAGE: http://sites.google.com/view/kminnick/home

Patrick J. Schorno

KPMG, USA ( email )

United States

Syed Shams

University of Southern Queensland ( email )

Sprinfield
Springfield
Springfield, Queensland 4300
Australia
+61734704551 (Phone)

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