The impact of trade policy uncertainty on stock price crash risk of listed tourism companies: evidence from China

ABSTRACT

This paper examines the effects of Trade Policy Uncertainty (TPU) on the listed tourism companies’ stock price crash risk. The paper addresses a potential endogeneity bias and finds that the TPU increases the stock price crash risk of the listed tourism firms within a sample of A-share listed tourism firms in China from 2002 to 2020. Besides, the influence of the TPU is more prominent in state-owned enterprises and companies with high analyst attention. It is also observed that improving internal governance mitigates the positive impact of the TPU on the stock price crash risk of listed tourism companies. Finally, it is found that the TPU increases the formation of bad company news and the hoarding of negative management news, thus increasing the risk of listed tourism companies’ stock price crashes. Possible implications of bad news formation and hoarding are also discussed.

KEYWORDS:

• Listed tourism companies
• trade policy uncertainty
• negative management news
• bad news hoarding
• A-share listed tourism firms

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 TPU, FPU, MPU, and ERPU refer to trade policy uncertainty, fiscal policy uncertainty, monetary policy uncertainty, and exchange rate policy uncertainty, respectively.

2 The Chinese capital market experienced a stock market crash in 2015, with thousands of stocks falling several times. And then, before the stock market fully recovered, another sudden outbreak of the new crown pneumonia epidemic caused many companies to suffer losses and a sharp drop in share prices.

3 The 14th Five-Year Plan for tourism development calls for a complete modern tourism system and an increase in the adequate supply of tourism. In addition, the government will timely introduce tourism development support policies to promote the coordinated development of outbound and domestic and inbound tourism in three markets.

4 The ten representative newspapers are Guangzhou Daily, Beijing Youth Daily, Shanghai Morning Post, Jiefang Daily, Southern Metropolis Daily, Today's Evening Post, People's Daily (Overseas Edition), Yangcheng Evening News, Xinjing Daily, and Wen Wei Po.

5 In principle, considering the change of leaders and their tenure, the sample of 2001–2002 should be excluded. Still, the sample time of this paper starts from 2002, so only the sample data of 2002 are excluded.