Does environmental management system certification keep enterprises out of trouble? Evidence from stock price crash risk

Hongyu Liu ¹, Qin Binbin ², Pengliang Qiao ¹

⁰School of Management, Guangzhou College of Technology and Business, Foshan City, China.

Plos One +

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January 8, 2025

View abstract on PubMed

Summary

Environmental management system (EMS) certification significantly reduces stock price collapse risk for polluting companies. This voluntary regulation enhances corporate environmental performance and information transparency, acting as a governance and information tool.

Area Of Science

Environmental Economics
Corporate Finance
Sustainability Studies

Background

Voluntary environmental regulations are increasingly adopted by corporations.
Environmental management system (EMS) certification is a key voluntary participatory environmental regulation.
Understanding the economic consequences of EMS certification, particularly on financial risk, is crucial.

Purpose Of The Study

To investigate the impact of EMS certification on the risk of stock price collapse.
To explore the mechanisms through which EMS certification affects stock price crash risk.
To examine the moderating role of media attention in this relationship.

Main Methods

Analysis of sample data from heavily polluting listed companies between 2008-2020.
Econometric analysis controlling for endogeneity.
Robustness tests to validate findings.

Main Results

EMS certification significantly inhibits stock price collapse risk.
The effect is more pronounced in state-owned enterprises and firms with higher marketization.
Mechanisms include improved environmental performance and enhanced information transparency.

Conclusions

EMS certification serves as an effective tool for both environmental governance and improving corporate information transparency.
It demonstrably suppresses stock price crash risk.
Findings provide theoretical and practical support for environmental regulators and inform corporate sustainability strategies.