Effect of green innovation strategy on firm‐idiosyncratic risk: A competitive action perspective

Abstract

Despite increasing concern for corporate environmental responsibility in numerous industries, the relationship between green innovation strategy (GIS) and idiosyncratic risk is a rarely scrutinised topic, particularly in the automotive domain. In this study, we empirically explore the association between GIS and idiosyncratic risk and analyse the moderating role played by the firm's competitive action. We rely on the secondary information sourced for 132 top automotive firms, in the period ranging from 2011 to 2017 by applying the system generalised methods of moments estimator to the dynamic panel data model. Our findings indicate that GIS significantly reduces the idiosyncratic risk of all firms, and this relationship strengthens with the increase in the competitive action of the firms. Our evidence supports “it pays to be green” firm heterogeneity argument. This study highlights the academic and managerial implications and focuses on the environmental issues published in environmental management literature.

Corruption and social trust: The role of corporate social responsibility

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The management of sustainable development: A longitudinal analysis of the effects of environmental performance on economic performance

“…Green innovation is defined as changes in products, services, or business models undertaken by organizations to sustain their green orientation (Lin, Mohamed, Sambasivan, & Yip, 2019; Tang, Walsh, Lerner, Fitza, & Li, 2018). Green product innovation is associated with product development practices that reduce the quantity of resources used and their environmental impact (Dangelico, 2016; Dangelico & Pujari, 2010; Dangelico, Pujari, & Pontrandolfo, 2017; Lee & Kim, 2011).…”

Sustainable Disclosure Policies and Sustainable Performance of European Listed Companies

“…For example, Flammer et al (2019) [33] show that environmental shareholder activism increases the voluntary disclosure of climate change risks and, in turn, achieves a higher valuation, suggesting that investors value transparency with respect to climate change risks. Increases in sustainability disclosures driven by regulation are associated with increases in firm's financial health and market valuations, as reflected in Tobin's Q [34,35], in ROA [35,36], liquidity [35,36] in market confidence, thereby reducing stock market return risk through volatility [37][38][39] or through eliminating stock market speculation [40]. Rezaee and Tuo (2019) [41] finds that sustainability disclosure quantity is positively associated with innate earnings quality and negatively correlated with discretionary earnings quality in mitigating managerial earnings manipulation and unethical opportunistic reporting behavior.…”