Does voluntary environmental information disclosure prevent stock price crash risk? : comparative analysis of chaebol and non-chaebol in Korea

This research sheds light upon the relationship between Korean firms' voluntary carbon disclosure tendency, as measured in Environmental Information Disclosure (EID), and their stock price crash. We pay attention to whether firms' affiliation to the chaebols, unique conglomerates in the nation, and environmentally sensitive industry, play as decisive role in mitigating stock price crash. For analysis, we divide samples into two different categories - namely, chaebols and non-chaebols, and environmentally sensitive and non-environmentally sensitive firms. Our findings are as following. First, we find the negative relation between EID for Korean firms and price crash risk in general. Second, we prove a negative relationship between EID and stock price crash for non-chaebols, which implies that their effort for voluntary environmental information disclosure reduces information asymmetries, thereby mitigating firm risk. Lastly, we find the negative relationship between EID and stock price crash for firms in non-environmentally sensitive industries, implying that their effort for voluntary carbon disclosure is more rewarded by investors and capital market.