June 2023
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We examine whether environmental performance is related to the probability of occurrence of corporate environmental events. We find that a firm’s aggregate environmental performance is negatively related to the probability of a negative environmental event. When we distinguish between environmental strengths and concerns, we find that strengths (concerns) are strongly related to positive (negative) events, consistent with stakeholder theory. However, strengths (concerns) are also significantly linked to negative (positive) environmental events, which is consistent with the presence of a compensation effect, whereby firms can compensate their environmental concerns with corporate social responsibility (CSR) practice that increase their environmental strengths.KeywordsCorporate social responsibilityEnvironmental performanceEnvironmental riskExtra-financial ratingsEventsMedia coverage