Climate Policy Uncertainty And Stock Price Crash Risk: Evidence From Tourism And Hospitality Industry

Abstract

There is limited empirical evidence regarding how climate policy uncertainty (CPU) affects the stock price crash risk, especially the U.S. tourism and hospitality (HT) industry. Using 2,548 observations from 285 unique U.S. HT firms for the period between 1987 and 2020, I find a positive association between CPU and stock price crash risk, suggesting increased crash risk for firms in the HT sector during periods heightened CPU. Further investigation reveals that this link is stronger for firms facing high levels of information asymmetry and financial constraints. Additionally, my research confirms that heightened CPU encourages managers to withhold negative news, exacerbating information asymmetry among market participants and consequently raising the chances of subsequent stock price crashes within the HT industry. Overall, this study contributes to the literature on policy uncertainty indicators and factors affecting crash risk, offering insights valuable for risk management and investment decisions, particularly within the tourism and hospitality sector