Firms' exposures on COVID-19 and stock price crash risk: Evidence from China

Xiaowei Kong; Yifan Jin; Lihua Liu; Jialu Xu

doi:10.1016/j.frl.2022.103562

Firms' exposures on COVID-19 and stock price crash risk: Evidence from China

Financ Res Lett. 2023 Mar:52:103562. doi: 10.1016/j.frl.2022.103562. Epub 2022 Dec 1.

Authors

Xiaowei Kong¹, Yifan Jin², Lihua Liu³, Jialu Xu⁴

Affiliations

¹ School of Economics and Management, Dongguan University of Technology, China.
² School of Management, Jinan University, China.
³ School of Accounting, Guangdong University of Foreign Studies, China.
⁴ Department of Sustainability, Wake Forest University, United States.

Abstract

This study examines the impact of firms' exposures on COVID-19 sentiment on the stock price crash risk. We show the exposure on COVID-19 sentiment related to the medical, travelling and uncertain aspects significantly increases the stock price crash risk, while the exposure on COVID-19 sentiment related to vaccines significantly decreases the risk of stock price crash. Furthermore, our findings are stronger for non-state-owned firms and firms with low information transparency. Overall, we provide timely policy implication for economic impacts of the COVID-19 on the stock market.

Keywords: COVID-19; China; Sentiment; Stock price crash risk.