Title: The effect of climate policy uncertainty on stock markets in China

Authors: Lin Tian; Weilun Tian; Jiarui Wang; Min Bai

Addresses: School of Business, Zhengzhou University, Henan, China ' School of Business, Zhengzhou University, Henan, China ' School of Finance, Nankai University, Tianjin, China ' School of Accounting Finance and Economics, Waikato University, New Zealand

Abstract: This study investigates the impact of climate policy uncertainty on the stock price crash risk from the perspective of investment behaviour. Using a large sample of Chinese listed firms over the period 2009-2021, this study reveals that climate policy uncertainty decreases the risk of stock price crashes, which holds true even after various tests for robustness. The study's mechanism analysis indicates that this effect is due to the reduction of institutional investors' shareholdings and the improvement of firm investment efficiency. Furthermore, climate policy uncertainty has a more pronounced inhibitory impact on stock price crash risk for non-state-owned, capital-intensive, and technology-intensive firms. Overall, we provide a timely assessment of the impact of climate policy uncertainty on capital markets in emerging countries, such as China, from a new perspective of stock price crash risk.

Keywords: climate policy uncertainty; CPU; stock price crash risk; China; investment behaviour.

DOI: 10.1504/IER.2024.140244

Interdisciplinary Environmental Review, 2024 Vol.23 No.4, pp.340 - 357

Received: 17 Aug 2023
Accepted: 20 Jan 2024
Published online: 31 Jul 2024 *

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