Climate Policy Uncertainty And Stock Price Crash Risk - Evidence From Uk

Abstract

There is little empirical data demonstrating how climate policy uncertainty (CPU) affects corporate policy. Through the analysis of data from 25,391 firm-year observations of 3,189 distinct firms listed on the London Stock Exchange (LSE) between 1990 and 2022, this study concludes that there is a positive correlation between CPU and notable stock price declines, suggesting that higher CPU increases the likelihood of stock price crashes at the firm level. According to more research, this association is stronger in businesses where there are more financial limitations, knowledge asymmetry, or demands from a competitive market. By clarifying the mechanisms behind crash risk and policy uncertainty, this research contributes to the depth of knowledge on the role of policy uncertainty in crash risk and provides useful insights for stakeholders in risk management and investment decision-making.