Economic Policy Uncertainty, Geopolitical Risk, CEO Power, and Stock Price Crash Risk: Evidence from Indonesia

Anik Kurnia Ningsih, Ulil Hartono and Harlina Meidiaswati
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Anik Kurnia Ningsih: Faculty of Economics and Business, Universitas Negeri Surabaya, Surabaya, Indonesia.
Ulil Hartono: Faculty of Economics and Business, Universitas Negeri Surabaya, Surabaya, Indonesia.
Harlina Meidiaswati: Faculty of Economics and Business, Universitas Negeri Surabaya, Surabaya, Indonesia.

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Abstract: Aims: This study examines whether economic policy uncertainty, geopolitical risk, and CEO power are associated with stock price crash risk in the Indonesian equity market, providing empirical evidence from an emerging market. Study Design: The study employs a quantitative explanatory approach using panel data analysis. Place and Duration of Study: The study utilizes secondary data from publicly listed non-financial firms on the Indonesia Stock Exchange covering the 2014–2024 period. Methodology: This study uses panel data of non-financial firms listed on the Indonesia Stock Exchange from 2014 to 2024. Stock price crash risk is measured using negative conditional skewness and down-to-up volatility, while economic policy uncertainty is proxied by a news-based index from major Indonesian media, geopolitical risk by the Indonesia-specific index from policyuncertainty.com, and CEO power by CEO duality. The relationships are examined using random effects panel regression models. Results: The results indicate that both economic policy uncertainty and geopolitical risk are positively and significantly associated with stock price crash risk, suggesting that heightened uncertainty increases the likelihood of extreme negative stock price movements. CEO power exhibits a measure-dependent effect, showing a significant positive relationship with down-to-up volatility but not with negative conditional skewness. Conclusion: The findings demonstrate that stock price crash risk in Indonesia is influenced by both external uncertainty and internal governance factors. These results underscore the importance of policy stability and effective corporate governance in mitigating downside risk in emerging equity markets.

Date: 2026-01-15
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Published in Journal of Economics and Trade, 2026, 11 (1), pp.78-87

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05464396

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