CEO power and stock price crash risk: moderating effect of environmental practices

Abstract This paper investigates the influence of CEO power on corporate stock price crash risk in developed market context, and further examines the moderating impact of corporate environmental practices. Two environmental practices are examined: greenhouse gas (GHG) emissions and Sustainable Development Goal 13 (SDG-13 supporting climate action). Analysing data from publicly listed firms in the G7 nations from 2006 to 2021, empirical results show that firms led by more powerful CEOs are generally exposed to lower crash risks. Additionally, results show that companies implementing stronger environmentally friendly practices, particularly, supporting climate actions - SDG-13, see a further reduced crash risk. This pattern is especially evident in non-crisis period, non-financial firms, and firms with high environmental and social (ES) scores, i.e., Corporate Social Responsibility (CSR) performance. The findings are validated by various robustness tests using alternative estimation models, alternative measures, and additional tests. Our findings provide practical implications for firms, investors, regulators, and policymakers.