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Unmasking the carbon conundrum: How emissions impact stock price crash risk

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  • Tran, Vuong Thao
  • Phan, Dinh Hoang Bach
  • Tee, Chwee-Ming
  • Nguyen, Dat Thanh

Abstract

This study examines the influence of carbon risk on stock price crash risk. Using a comprehensive dataset of 3,417 US companies from 2006 to 2021, we provide evidence that carbon risk is significantly linked to a higher crash risk for firms. Moreover, our findings suggest that this positive association is more pronounced during the Democratic presidency and to companies operating in carbon-intensive industries. The main results are consistent after conducting endogeneity and several robustness tests.

Suggested Citation

  • Tran, Vuong Thao & Phan, Dinh Hoang Bach & Tee, Chwee-Ming & Nguyen, Dat Thanh, 2024. "Unmasking the carbon conundrum: How emissions impact stock price crash risk," Finance Research Letters, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:finlet:v:64:y:2024:i:c:s1544612324004732
    DOI: 10.1016/j.frl.2024.105443
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    More about this item

    Keywords

    Carbon risk; Carbon emission; Polluting firms; Stock price crash risk;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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