The impact of green financial development on stock price crash risk from the perspective of information asymmetry in Chinese listed companies

Abstract

Solving the crash risk problem of corporate stock price caused by information asymmetry can mitigate the negative externality of its carbon emission to become green, low-carbon, and high-quality development. Green finance generally profoundly impacts micro-corporate economics and macro-financial systems but remains a giant puzzle of whether they can effectively resolve the crash risk. This paper examined the impact of green financial development on the stock price crash risk using the sample data of non-financial listed companies in Shanghai and Shenzhen A stock market in China from 2009 to 2020. We found that green financial development significantly inhibits the stock price crash risk; this is more obvious in listed companies with a high level of asymmetric information. And companies in high-level regions of green financial development attracted more attention from institutional investors and analysts. As a result, they disclosed more information about their operational status, thus reducing the crash risk of corporate stock price from the torrential public pressure of lousy environmental details. Therefore, this study will help continuously discuss the costs, benefits, and value promotion of green finance for synergy between corporate performance and environmental performance to improve ESG capabilities.

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“…The assessment of the financial situation of the enterprise helps in identifying problems and critical circumstances in time, thus preventing bankruptcy. If a firm aims to be successful in the market and compete in a rapidly changing environment, it should consider not only an adequate financial nation but also subsequent financial development (Zhang and Ding 2023). In general, a financially healthy company (Kliestik et al 2020b) fulfills two requirements: (i) it is liquid over the long term (i.e., it can pay its obligations on time both now and in the future as long-term liquidity is significantly influenced by the ratio of equity and debt financing in the overall capital structure of the company (Santos et al 2022)); and (ii) it is profitable (i.e., it can generate enough profit to cover its costs through its business activities (Ogunode et al 2022)).…”