Economic policy uncertainty and stock price crash risk

By Xuejun Jin, Ziqing Chen, Xiaolan Yang. Accounting and Finance, 2019

193 citations recorded by the source corpus.

This paper studies the impact of economic policy uncertainty on stock price crash risk using data from China. We develop a new index to measure Chinese economic policy uncertainty and find that economic policy uncertainty has a remarkable positive effect on stock price crash risk. However, the effect reverses later. The results also indicate that the positive effect of economic policy uncertainty on stock price crash risk is more prominent for state‐owned enterprises. Moreover, this effect is more prominent for firms with higher information asymmetry and firms with greater disagreement among investors, indicating that economic policy uncertainty affects crash risk through two mechanisms: managers’ concealment of bad news and investors’ heterogeneous beliefs.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/9a76cbaea045c4e8e526735118933644a4060ddd