This study uses meta-analysis to examine the relationship between corporate sustainability reporting (CSR) and stock price crash risk (SPCR) and to discern the moderating effects of country-level institutional quality and cultural dimensions on this link.
The study used mean correlation coefficients to test the relationship between CSR and SPCR and meta-regressions to test the moderating effects. The analysis considers 65 effect sizes from 24 empirical studies.
The results showed that CSR reduces the chances of SPCR. The inverse relationship between CSR and SPCR is stronger in masculine, high power distance and long-term oriented cultures and is less pronounced in individualistic, uncertainty avoidance and indulgent cultures. The inverse relationship is also stronger in countries where high-quality institutions exist.
This study is based on correlation coefficient analysis and excludes studies publishing only regression results. Furthermore, it provides guidance to lessen SPCR. Findings suggest that such initiatives may mitigate the risk of stock price crashes for firms. Through meta-analysis, this research investigates the correlation between environmental, social and governance (ESG) disclosure and stock price crash occurrences, offering insights with significant implications for the European financial landscape and globally.
This is a pioneer meta-analysis that investigates the link between CSR and SPCR and the moderating effects of country-level institutional quality and cultural dimensions. Our study sheds light on the potential impact of promoting a sustainable and responsible business environment in Europe through comprehensive ESG disclosure under the Corporate Sustainability Reporting Directive (CSRD).
