Climate policy uncertainty and financial market stability: evidence from stock price crash risk in China

Lingpeng Shi (), Leyi Chen () and Ziqing Wu ()
Additional contact information
Lingpeng Shi: Hunan University
Leyi Chen: Hunan University
Ziqing Wu: Hunan University

Risk Management, 2026, vol. 28, issue 1, No 6, 43 pages

Abstract: Abstract This paper investigates the relationship between climate policy uncertainty and stock price crash risk. Our findings indicate that climate policy uncertainty significantly elevates the risk of stock price crashes. This relationship holds robustly after addressing potential endogeneity concerns and conducting various robustness checks. Through mechanism analysis, we demonstrate that climate policy uncertainty heightens corporate operational risk and systemic risk, thereby increasing the risk of stock price crashes. In our extended analysis, we find the risk of stock price crashes tends to be more pronounced in companies operating in less competitive markets and in those with lower customer concentration. Additionally, increased crash risk due to rising climate policy uncertainty can impair firms’ ability to access funds. This research provides a reasonable explanation for stock price crash risk from the perspective of policy changes, thereby enriching our understanding of the relationship between environmental policies and financial market stability.

Keywords: Climate policy uncertainty; Stock price crash risk; Operational and systemic risks; Digital transformation; Financialization (search for similar items in EconPapers)
JEL-codes: G32 G33 Q54 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1057/s41283-025-00185-5 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:risman:v:28:y:2026:i:1:d:10.1057_s41283-025-00185-5

Ordering information: This journal article can be ordered from
https://www.palgrave.com/gp/journal/41283

DOI: 10.1057/s41283-025-00185-5

Access Statistics for this article

Risk Management is currently edited by Igor Loncarski

More articles in Risk Management from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().