Judicial innovation and market response: How the establishment of environmental tribunals affects stock volatility in polluting industries?

This study employs the establishment of environmental tribunals as a quasi-natural experiment, utilizing data from heavily polluting listed companies from 2007 to 2023 to systematically examine the impact of enhanced environmental judiciary on corporate stock price volatility. The results indicate that the establishment of environmental tribunals significantly reduces stock price volatility in heavily polluting firms, a finding that remains robust across multiple rigorous tests. Further mechanism analysis reveals that both corporate green innovation and executives’ green cognition strengthen the negative moderating effect of environmental tribunals on stock price volatility in heavily polluting enterprises. Additionally, environmental tribunals primarily suppress stock price volatility by enhancing regional marketization levels. Heterogeneity analysis shows that the stock-stabilizing effect of environmental tribunals is more pronounced in firms with higher media attention and those that are less labor-intensive.