Electricity Blackout and Its Ripple Effects: Examining Liquidity and Information Asymmetry in U.S. Financial Markets

Dosung Kim, Jang-Chul Kim, Qing Su and Sung-Kwan Joo ()
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Dosung Kim: The School of Electrical Engineering, Korea University, Seoul 02841, Republic of Korea
Jang-Chul Kim: Department of Accounting, Economics, and Finance, Haile College of Business, Northern Kentucky University, Highland Heights, KY 41099, USA
Qing Su: Department of Accounting, Economics, and Finance, Haile College of Business, Northern Kentucky University, Highland Heights, KY 41099, USA
Sung-Kwan Joo: The School of Electrical Engineering, Korea University, Seoul 02841, Republic of Korea

Energies, 2023, vol. 16, issue 13, 1-10

Abstract: The massive blackout that occurred in August 2003 left over 50 million people in the northeastern and midwestern parts of the United States without electricity and caused billions of dollars in economic losses. This event highlighted the importance of sustainable and resilient energy infrastructure. Our study examines the impact of this blackout on the sustainability of financial markets by analyzing the liquidity and information asymmetry of U.S. stocks listed on major exchanges. Our results show that the blackout had a negative impact on the financial market’s liquidity, as evidenced by a significant widening of bid–ask spreads and a decrease in the market quality index. We also find an increase in information asymmetry during the blackout period, as measured by higher realized spreads. Furthermore, our study reveals that the blackout had a border impact on global financial markets and the negative effect on liquidity persisted even after two weeks.

Keywords: blackout; liquidity; information asymmetry; electric utilities (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
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