Strategic adoption of ISO14001 certification and stock price crash risk

This study examines the impact of ISO 14001 certification on stock price crash risk using a sample of 14,161 firms from G10 countries from 2000 to 2021, resulting in 144,489 firm-year observations. The findings indicate a positive association between ISO 14001 certification and stock price crash risk, suggesting that certified firms are more likely to conceal unethical behaviours and negative information. This phenomenon aligns with agency theory, as firms may use ISO 14001 to enhance their image while masking bad news, leading to increased crash risk. The results, supported by various robustness checks, reveal that the effect is particularly pronounced in large firms with low R&D intensity and low growth rates, especially in weak institutional environments characterised by low investor protection and poor audit quality.