Economic Policy Uncertainty and Stock Price Crash Risk: Based on panel data models

Abstract

We examine the relationship between economic policy uncertainty (EPU) and stock price crash risk based on the stock data of China A-share market from 2007-2019. Correlation analysis, univariate and multivariate test, robustness test and heterogeneity test are used to analyze the data. According to the results, economic policy uncertainty is negatively correlated with stock price crash risk. This correlation is valid since it passes the robustness test of replacing the main independent and the dependent variables. Further analysis reveals that this negative relationship is more obvious in certain situations. Specifically, it includes four cases: (1) the enterprise is not a state-owned enterprise; (2) the Big Four audit is not selected; (3) the proportion of institutional investors is low, and (4) the analyst coverage rate is low. These results shed light for an important influencing factor of stock price collapse and provides a reference value for the prevention and response of stock price collapse.