Government debt and stock price crash risk: International Evidence

Hamdi Ben-Nasr and Sabri Boubaker
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Hamdi Ben-Nasr: Qatar University
Sabri Boubaker: VNU - Vietnam National University [Hanoï], Métis Lab EM Normandie - EM Normandie - École de Management de Normandie = EM Normandie Business School, Swansea University

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Abstract: We add to the literature on the economic outcomes of government debt and argue that government debt increases crash risk via two channels: (i) hoarding bad news and (ii) tax avoidance. Based on a large international sample, our results indicate that stock crash risk is positively associated with government debt. Our conclusions are robust when we treat endogeneity issues, and our tests confirm the validity of bad news hoarding and tax avoidance as channels through which government debt influences stock price crash risk.

Keywords: Government debt; Fiscal policy uncertainty; Bad news hoarding; Tax avoidance; Crash risk (search for similar items in EconPapers)
Date: 2024-02-16
New Economics Papers: this item is included in nep-fdg, nep-rmg, nep-sea and nep-tra
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Published in Journal of Financial Stability, 2024, 72, pp.101245. ⟨10.1016/j.jfs.2024.101245⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04648524

DOI: 10.1016/j.jfs.2024.101245

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