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Economic policy uncertainty, risk perception and stock price crash risk: Evidence from China

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  • Liu, Xiaojun
  • Ma, Yong
  • Xu, Zhongyue

Abstract

This paper investigates the moderating role of the macroeconomic environment in the crash risk-policy uncertainty sensitivity. We find that managers have lower risk perception and crash risk is less sensitive to policy uncertainty during periods of economic expansion. Managers’ risk perception is the critical channel through which the macroeconomic environment affects the relationship between crash risk and policy uncertainty. Consequently, when firms’ managers have an accurate understanding of the future economic environment, the moderating effect of economic growth is lower. This manifests in the weaker moderating effect of economic growth for SOEs and firms with stronger managerial ability, lower managerial ownership, and high media attention, which further supports the risk perception channel.

Suggested Citation

  • Liu, Xiaojun & Ma, Yong & Xu, Zhongyue, 2024. "Economic policy uncertainty, risk perception and stock price crash risk: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 865-876.
    • Handle: RePEc:eee:ecanpo:v:82:y:2024:i:c:p:865-876
    DOI: 10.1016/j.eap.2024.04.013
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    More about this item

    Keywords

    Economic policy uncertainty; Risk perception; Macroeconomic environment; Crash risk;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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