Study into stock market tail risk and information asymmetry
Publication Date
July 25, 2026
Creator
Abstract
The first study, using firm-level climate change exposure data, demonstrates that firms with higher exposure to climate change face an increased likelihood of stock price crashes. These risks arise from managerial incentives to withhold bad news due to concerns about market devaluation associated with high exposure. However, during periods of heightened public attention, the difficulty of concealing bad news increases, thereby mitigating this effect. This chapter further examines the causal impact of Donald Trump’s unexpected election victory on firms’ exposure to climate regulation and the associated crash risk. A difference-in-differences (DiD) model is estimated around the 2016 U.S. presidential election. The results show that after Trump assumed office in 2017, firms previously subject to climate regulation experienced a disproportionate decline in crash risk compared with firms not affected by such rules. The findings also indicate that firms exposed to climate regulation were more likely to withhold negative information from investors before the election shock.
The second study investigates the effect of risk-taking incentives, measured by debt-based compensation for both CEOs and CFOs, on firm-level intangible intensity using three empirical approaches. Theoretically, in- tangible intensity is closely related to information asymmetry; hence, it is hypothesized that debt-based compensation discourages managers from accumulating intangible assets. Using U.S. data from 2006 to 2022, panel regression results indicate that higher levels of debt-based compensation for both CEOs and CFOs significantly reduce intangible intensity. Across multiple estimation methods, the results indicate that CEO incentives have a stronger influence than those of CFOs.
The third study explores the positive relationship between economic pol- icy uncertainty (EPU) and country-level stock market tail risk. The effect of EPU on financial market tail risk is significant across all countries, especially for emerging markets. As a major source of global policy uncertainty, pandemic-related concerns—measured by the weighted frequency of epidemic-related discussions—and trade policy uncertainty are further examined. The regression results confirm that higher levels of these uncertainties are associated with greater market tail risk.
Item Type
ethesis
Thesis Type
PhD
Supervisors
Subjects (LC)
Associated Schools / Departments
Nottingham University Business School (UK)
eprints ID
82763
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