Economic policy uncertainty and stock price crash risk. (14th February 2019)

• Record Type: Journal Article
• Authors: Jin, Xuejun; Chen, Ziqing; Yang, Xiaolan
• Is Part Of: Accounting and finance. Volume 58:Number 5(2019)
• Page Start: 1291
• Page End: 1318
• Publication Date: 2019-02-14
• Subjects: Economic policy uncertainty -- Chinese stock market -- Crash risk; Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12455
• Languages: English
• ISSNs: 0810-5391

Abstract

Abstract: 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.