Research On The Impact Of Economic Policy Uncertainty On The Risk Of Stock Price Collapse

In recent years,the world economy has been impacted by various international events,the Brexit of the United Kingdom,the Russia-Ukraine conflict,the COVID-19,etc.,and the global economic environment has accelerated turbulence.At the same time,China’s economy has entered a new normal stage.In order to cope with the adverse effects of global economic turbulence and promote the goal of high-quality economic development,the Chinese government has successively issued a series of economic policies.However,frequent policy changes have exacerbated the uncertainty of China’s economic policy,which will have an impact on micro-enterprises and investors in the stock market.The rising uncertainty of economic policy will affect the business decisions of enterprises,aggravate the agency problem,worsen the market information environment,undermine investor confidence,and lead to the risk of stock price collapse.Therefore,this paper studies the impact of economic policy uncertainty on the risk of stock price collapse,and explores its mechanism from the perspective of internal and external stock markets.This paper takes China’s A-share listed companies from 2010 to 2020 as the sample,takes China’s economic policy uncertainty index as the explanatory variable,and the two proxy variables of the risk of stock price collapse,the negative return skewness coefficient and the fluctuation ratio of up and down,as the explanatory variable.Through the twoway fixed effect model,this paper empirically tests the impact of economic policy uncertainty on the risk of stock price collapse,and introduces institutional investors’ shareholding as the intermediary variable.This paper explores the mechanism of the impact of economic policy uncertainty on the risk of stock price collapse,and tests the regulatory role of investor sentiment and the quality of information disclosure.Finally,we analyze the heterogeneity from the perspective of equity nature and enterprise size.The research conclusions are as follows: First,the rising uncertainty of economic policy will affect the risk of stock price collapse from both internal and external stock markets.Second,the rising uncertainty of economic policy will make it more difficult for institutional investors to judge the future situation of enterprises,intensify their short-term investment behavior,and trigger institutional investors to reduce their holdings.As institutional investors tend to occupy a large amount of capital,it will aggravate the risk of stock price collapse of enterprises.Third,when investors’ sentiment in the market is high,their decisions will be more aggressive and bold,and the trading frequency is high.At this time,the uncertainty of economic policy has a more significant positive impact on the risk of stock price collapse.Fourth,when the quality of information disclosure of an enterprise is at a high level,its information transparency is high,and it will not be affected by the deterioration of the market information environment.The uncertainty of economic policy has a weak positive impact on the risk of its share price collapse.Fifth,further research found that among non-state-owned enterprises and small-scale enterprises,economic policy uncertainty has a greater impact on the risk of stock price collapse.Finally,according to the research conclusion,this paper puts forward relevant suggestions for the three dimensions of government departments,micro-enterprises and investors.