Reputational risk: An investigation into how environmental failures drive stock price crashes

Man Dang, Premkanth Puwanenthiren, Edward Jones, Hoang Long Phan and Abdelhafid Benamraoui 2025. Reputational risk: An investigation into how environmental failures drive stock price crashes. Business Strategy and The Environment. Advanced online publication. https://doi.org/10.1002/bse.70466

TitleReputational risk: An investigation into how environmental failures drive stock price crashes
TypeJournal article
AuthorsMan Dang, Premkanth Puwanenthiren, Edward Jones, Hoang Long Phan and Abdelhafid Benamraoui
Abstract

The study examines the relationship between stock price crashes and firm environment reputational risk. Using a large sample of U.S. listed firms, covering a time span from 2007 to 2021, we test the effect of environmental reputation risk on three measures for the stock price crash risk (NEGCSK, DRUV, and CRASH). The findings reveal a strong positive relationship between stock price crash risk and environmental reputation risk. The relationship is more pronounced in firms with weaker governance, less concentrated industries, and subject to corporate cultures that lack innovation. The study contributes to the literature linking corporate environmental approach or strategy and financial markets, emphasizing the importance of green reputation in firms’ strategy to protect shareholder value and to promote long-term sustainability.

KeywordsStock price crash risk
Environment
Reputational risk
Industry concentration
Corporate culture
JournalBusiness Strategy and The Environment
ISSN0964-4733
1099-0836
Year2025
PublisherWiley
Publisher's version
License
CC BY 4.0
File Access Level
Open (open metadata and files)
Digital Object Identifier (DOI)https://doi.org/10.1002/bse.70466
Publication dates
Published online17 Dec 2025

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