Policy synergy on stock price crash risk: An intergovernmental perspective

Yinchao Liao, Jun Wang, Lei Liao, Xiaoyang Shu and Tao Peng

Finance Research Letters, 2024, vol. 67, issue PA

Abstract: Both central and local government policies present implications for companies and investors. While several studies evidence that government policies shape corporate behaviors, few studies have explored them from an intergovernmental view. This research constructs a new measurement of intergovernmental policy synergy with text-based tools and reveals an inverted U-shaped relation between central-local policy synergy and stock price crash risk, which still holds after checking robustness. Furthermore, we validate corporate greenwashing and divergence of investors’ opinion as underlying mechanisms. Additionally, the relation is more prominent among firms without online interactive platform and firms with high web search intensity.

Keywords: Intergovernmental relations; Stock price crash risk; Institutional complementarity; Institutional inconformity (search for similar items in EconPapers)
JEL-codes: G12 G14 G18 G34 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324007748

DOI: 10.1016/j.frl.2024.105744

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