Research On The Impact Of COVID-19 Epidemic On The Risk Of Stock Price Crash Of Listed Companies Under The Normalization Of Epidemic Prevention And Control

The risk of stock price collapse refers to the risk of a significant drop in stock prices in the short term without warning.Once it occurs,it will cause significant losses to investors and also have a serious impact on the stability of the financial market.According to existing research,company managers tend to conceal negative information about the company in order to seek personal gain and avoid a decline in the company’s stock price.They also tend to disclose positive information to maintain stock prices.According to the theory of information asymmetry,company managers have a certain information advantage and there is information asymmetry between them and shareholders,which provides space for managers to conceal negative information about the company.When the amount of negative information concealed exceeds the upper limit of the space provided by information asymmetry,all concealed negative information will erupt in a short period of time,leading to severe fluctuations in stock prices and stock price crashes.The COVID-19 broke out at the end of 2019,which not only posed a serious threat to the life and health of the people throughout the country,but also brought a huge impact on the macro-economy and capital market.From the analysis of internal factors of the company,due to the impact of the COVID-19,the company’s operating environment has deteriorated and the uncertainty faced has increased.In order to prevent the company’s stock price from falling and enhance investor confidence,the company’s managers have increased their motivation to conceal negative information;The COVID-19 has reduced the quality of the company’s internal control,weakened the constraints on the self-interest behavior of the company’s managers,and provided space for managers to conceal the company’s negative information.From the analysis of external factors of the company,the COVID-19 has hindered the external access to the company’s information,affected the effective dissemination of information,and provided convenience for the company to conceal negative information;The overwhelming amount of epidemic information has led investors to focus limited attention on the epidemic,which has to some extent reduced their attention to company specific information.Under the dual influence of internal and external factors,negative information of the company is more likely to be concealed,thus exacerbating the risk of stock price collapse.In this context,to study the impact of the COVID-19 on the stock price crash and explore how to stabilize China’s stock prices under the impact of the epidemic is related to the healthy development of China’s stock market and the stability of the financial market.Although the impact of the COVID-19 epidemic on the capital market has attracted extensive attention from scholars at home and abroad,there are also some limitations.On the one hand,most of them focus on the impact of the epidemic on financial return on assets,and on the other hand,they mainly discuss the national epidemic information.Based on this,this paper discusses the effect and mechanism of COVID-19 epidemic on the stock market from the perspective of the risk of stock price crash.This paper matches the epidemic data with the prefecture level city where the listed companies are registered,accurately discusses the impact of the COVID-19 on the stock crash of companies,analyzes the internal mechanism of the impact of the COVID-19 epidemic on the stock crash from the perspective of information asymmetry,and finally puts forward relevant suggestions from the perspective of micro companies.At the data level,this article selects 2960 stocks of companies in China’s A-share market as research samples,spanning from June 2020 to December 2021,with a total of 53596 monthly observations.This article constructs two indicators,negative conditional skewness and upward downward volatility,to measure the risk of a company’s stock price collapse,based on the increase rate of newly confirmed cases in the city where the company is registered and the degree of epidemic spread.On the empirical level,this paper conducts a benchmark regression between the two indicators of negative conditional skewness and upward and downward volatility and the growth rate of newly confirmed cases in the city where the company is registered,and examines the impact of the spread of the epidemic on the risk of stock price collapse of listed companies in the context of the normalization of the COVID-19 epidemic.The study found that the spread of the COVID-19 epidemic in the context of normalization will increase the risk of stock price collapse of listed companies.Furthermore,this article also investigated whether the spread of the epidemic has a heterogeneous impact on the risk of a company’s stock price collapse.Referring to existing research,this article divides the sample companies into three groups for regression analysis:large-scale and small-scale companies(based on the median total assets of the company’s year and industry),state-owned and non-state-owned companies,and two in one companies(with the chairman and general manager being the same person)and non two in one companies.It was found that the risk of stock price collapse increases more significantly when small-scale companies,non-state-owned companies,and two in one companies are impacted by the epidemic.Finally,this article explores the impact mechanism of the spread of the epidemic on the risk of company stock price collapse from the perspective of information asymmetry,with stock price synchronicity as the proxy variable for the degree of information asymmetry.The impact of the epidemic has hindered the transmission of company specific information,exacerbated information asymmetry,reduced the quality of company information,and thus increased the risk of stock price collapse.This paper finds that under the normalization of epidemic prevention and control,the COVID-19 epidemic will significantly increase the risk of stock price crash of listed companies.The government needs to adopt active monetary and fiscal policies to weaken the impact of the epidemic on the macro market and reduce the uncertainty faced by companies after being impacted by the epidemic;Further strengthen the company’s information transparency requirements,open up channels for information transmission,and increase the difficulty and cost of management concealing negative information about the company.The company should improve the quality of information disclosure,strengthen internal control,and actively cooperate with the government and regulatory agencies to truthfully disclose internal information when facing the impact of the epidemic.Investors also need to enhance their ability to gather information and maintain a stable investment mindset.Through multiple efforts,we will jointly maintain the stability of China’s stock market and the healthy development of the financial market.