IDEAS home Printed from https://ideas.repec.org/a/gam/jijerp/v17y2020i20p7682-d432357.html
   My bibliography  Save this article

Risk Assessment on Continued Public Health Threats: Evidence from China’s Stock Market

Author

Listed:
  • Junjian Gu

    (Faculty of Business Sciences, University of Tsukuba, 3-29-1 Otsuka, Bunkyo-ku, Tokyo 112-0012, Japan)

Abstract

Given the disturbing effects of the coronavirus disease 2019 (COVID-19) outbreak, we are motivated to examine whether the continued increase of the provincial public health threats affects the firms’ accumulative abnormal return. Using the 178,805 firm-day observations from Chinese listed firms from 10 January to 31 March 2020, we find that the accumulative abnormal return is significantly lower among firms located in the provinces where face the continued increase of new confirmed COVID-19 cases. The relations remain constant after several robustness tests. These findings suggest that investors concern about the potential risk when firms are located in the provinces with higher threats to public health. We also find that the negative effect of increasing public health threats on abnormal return is weaker for firms surrounded by a provincial environment with stronger information accessibility and economic growth. Overall, this study extends the literature by presenting systematic evidence on the effect of the continued increase of provincial public health threats on the market reaction in Chinese listed firms.

Suggested Citation

  • Junjian Gu, 2020. "Risk Assessment on Continued Public Health Threats: Evidence from China’s Stock Market," IJERPH, MDPI, vol. 17(20), pages 1-30, October.
    • Handle: RePEc:gam:jijerp:v:17:y:2020:i:20:p:7682-:d:432357
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1660-4601/17/20/7682/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1660-4601/17/20/7682/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Chip Heath & Steven Huddart & Mark Lang, 1999. "Psychological Factors and Stock Option Exercise," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(2), pages 601-627.
    2. Nils Engelhardt & Miguel Krause & Daniel Neukirchen & Peter Posch, 2020. "What Drives Stocks during the Corona-Crash? News Attention vs. Rational Expectation," Sustainability, MDPI, vol. 12(12), pages 1-12, June.
    3. Jun Liu & Francis A. Longstaff & Jun Pan, 2003. "Dynamic Asset Allocation with Event Risk," Journal of Finance, American Finance Association, vol. 58(1), pages 231-259, February.
    4. Cuiyan Wang & Riyu Pan & Xiaoyang Wan & Yilin Tan & Linkang Xu & Cyrus S. Ho & Roger C. Ho, 2020. "Immediate Psychological Responses and Associated Factors during the Initial Stage of the 2019 Coronavirus Disease (COVID-19) Epidemic among the General Population in China," IJERPH, MDPI, vol. 17(5), pages 1-25, March.
    5. Paige H. Patrick, 2018. "Renegotiations of Target CEOs' Personal Benefits During Mergers and Acquisitions," Contemporary Accounting Research, John Wiley & Sons, vol. 35(4), pages 1999-2029, December.
    6. Zhang, Dayong & Hu, Min & Ji, Qiang, 2020. "Financial markets under the global pandemic of COVID-19," Finance Research Letters, Elsevier, vol. 36(C).
    7. José Manuel Feria-Domínguez & Pilar Paneque & María Gil-Hurtado, 2017. "Risk Perceptions on Hurricanes: Evidence from the U.S. Stock Market," IJERPH, MDPI, vol. 14(6), pages 1-18, June.
    8. Amar Gande & Christoph Schenzler & Lemma W Senbet, 2009. "Valuation effects of global diversification," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(9), pages 1515-1532, December.
    9. Bonsall, Samuel B. & Green, Jeremiah & Muller, Karl A., 2020. "Market uncertainty and the importance of media coverage at earnings announcements," Journal of Accounting and Economics, Elsevier, vol. 69(1).
    10. Yihui Pan & Tracy Yue Wang & Michael S. Weisbach, 2015. "Learning About CEO Ability and Stock Return Volatility," The Review of Financial Studies, Society for Financial Studies, vol. 28(6), pages 1623-1666.
    11. Sydney C. Ludvigson, 2004. "Consumer Confidence and Consumer Spending," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 29-50, Spring.
    12. Fuss, Sabine & Szolgayova, Jana & Obersteiner, Michael & Gusti, Mykola, 2008. "Investment under market and climate policy uncertainty," Applied Energy, Elsevier, vol. 85(8), pages 708-721, August.
    13. Chakravarty, Sugato & Sarkar, Asani & Wu, Lifan, 1998. "Information asymmetry, market segmentation and the pricing of cross-listed shares: theory and evidence from Chinese A and B shares," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(3-4), pages 325-356, December.
    14. De Bondt, Werner F M & Thaler, Richard, 1985. "Does the Stock Market Overreact?," Journal of Finance, American Finance Association, vol. 40(3), pages 793-805, July.
    15. Roger G. Ibbotson & Peng Chen, 2003. "Long-Run Stock Returns: Participating in the Real Economy," Yale School of Management Working Papers ysm354, Yale School of Management.
    16. Leone, Andrew J. & Wu, Joanna Shuang & Zimmerman, Jerold L., 2006. "Asymmetric sensitivity of CEO cash compensation to stock returns," Journal of Accounting and Economics, Elsevier, vol. 42(1-2), pages 167-192, October.
    17. Kim, Young Sang & Mathur, Ike, 2008. "The impact of geographic diversification on firm performance," International Review of Financial Analysis, Elsevier, vol. 17(4), pages 747-766, September.
    18. Francesco Di Gennaro & Damiano Pizzol & Claudia Marotta & Mario Antunes & Vincenzo Racalbuto & Nicola Veronese & Lee Smith, 2020. "Coronavirus Diseases (COVID-19) Current Status and Future Perspectives: A Narrative Review," IJERPH, MDPI, vol. 17(8), pages 1-11, April.
    19. Zhu, Bo & Niu, Feng, 2016. "Investor sentiment, accounting information and stock price: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 38(C), pages 125-134.
    20. Deqiu Chen & Li Li & Xuejiao Liu & Gerald J. Lobo, 2018. "Social Trust and Auditor Reporting Conservatism," Journal of Business Ethics, Springer, vol. 153(4), pages 1083-1108, December.
    21. Chen, Shiu-Sheng, 2011. "Lack of consumer confidence and stock returns," Journal of Empirical Finance, Elsevier, vol. 18(2), pages 225-236, March.
    22. Xuehua Han & Juanle Wang & Min Zhang & Xiaojie Wang, 2020. "Using Social Media to Mine and Analyze Public Opinion Related to COVID-19 in China," IJERPH, MDPI, vol. 17(8), pages 1-22, April.
    23. Ann Gaeremynck & Marleen Willekens, 2003. "The endogenous relationship between audit-report type and business termination: evidence on private firms in a non-litigious environment," Accounting and Business Research, Taylor & Francis Journals, vol. 33(1), pages 65-79.
    24. Schmeling, Maik, 2009. "Investor sentiment and stock returns: Some international evidence," Journal of Empirical Finance, Elsevier, vol. 16(3), pages 394-408, June.
    25. Ciao‐Wei Chen, 2019. "The Disciplinary Role of Financial Statements: Evidence from Mergers and Acquisitions of Privately Held Targets," Journal of Accounting Research, Wiley Blackwell, vol. 57(2), pages 391-430, May.
    26. Palomino, Frederic & Renneboog, Luc & Zhang, Chendi, 2009. "Information salience, investor sentiment, and stock returns: The case of British soccer betting," Journal of Corporate Finance, Elsevier, vol. 15(3), pages 368-387, June.
    27. Sterling Huang & Gilles Hilary, 2018. "Zombie Board: Board Tenure and Firm Performance," Journal of Accounting Research, Wiley Blackwell, vol. 56(4), pages 1285-1329, September.
    28. Hongyue Zhang & Rajib Shaw, 2020. "Identifying Research Trends and Gaps in the Context of COVID-19," IJERPH, MDPI, vol. 17(10), pages 1-17, May.
    29. Alexander F. Wagner, 2020. "What the stock market tells us about the post-COVID-19 world," Nature Human Behaviour, Nature, vol. 4(5), pages 440-440, May.
    30. Chenjing Fan & Tianmin Cai & Zhenyu Gai & Yuerong Wu, 2020. "The Relationship between the Migrant Population’s Migration Network and the Risk of COVID-19 Transmission in China—Empirical Analysis and Prediction in Prefecture-Level Cities," IJERPH, MDPI, vol. 17(8), pages 1-11, April.
    31. Muhammad Adeel Ahmed & Rizwan Jouhar & Naseer Ahmed & Samira Adnan & Marziya Aftab & Muhammad Sohail Zafar & Zohaib Khurshid, 2020. "Fear and Practice Modifications among Dentists to Combat Novel Coronavirus Disease (COVID-19) Outbreak," IJERPH, MDPI, vol. 17(8), pages 1-11, April.
    32. HaiYue Liu & Aqsa Manzoor & CangYu Wang & Lei Zhang & Zaira Manzoor, 2020. "The COVID-19 Outbreak and Affected Countries Stock Markets Response," IJERPH, MDPI, vol. 17(8), pages 1-19, April.
    33. Andrew Delios & Paul W. Beamish, 1999. "Geographic scope, product diversification, and the corporate performance of Japanese firms," Strategic Management Journal, Wiley Blackwell, vol. 20(8), pages 711-727, August.
    34. Wen-Jun Tu & Xiao-Guang Yue & Wei Liu & M. James C. Crabbe, 2020. "Valuation Impacts of Environmental Protection Taxes and Regulatory Costs in Heavy-Polluting Industries," IJERPH, MDPI, vol. 17(6), pages 1-21, March.
    35. Sharif, Arshian & Aloui, Chaker & Yarovaya, Larisa, 2020. "COVID-19 pandemic, oil prices, stock market, geopolitical risk and policy uncertainty nexus in the US economy: Fresh evidence from the wavelet-based approach," International Review of Financial Analysis, Elsevier, vol. 70(C).
    36. Chunyang Wang & Haiyang Zhang & Liping Lu & Xirui Wang & Ziyu Song, 2019. "Pollution and corporate valuation: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 51(32), pages 3516-3530, July.
    37. Sijia Li & Yilin Wang & Jia Xue & Nan Zhao & Tingshao Zhu, 2020. "The Impact of COVID-19 Epidemic Declaration on Psychological Consequences: A Study on Active Weibo Users," IJERPH, MDPI, vol. 17(6), pages 1-9, March.
    38. Jun He & Leshui He & Wen Zhou & Xuanhua Nie & Ming He, 2020. "Discrimination and Social Exclusion in the Outbreak of COVID-19," IJERPH, MDPI, vol. 17(8), pages 1-4, April.
    39. Jayson S. Jia & Xin Lu & Yun Yuan & Ge Xu & Jianmin Jia & Nicholas A. Christakis, 2020. "Population flow drives spatio-temporal distribution of COVID-19 in China," Nature, Nature, vol. 582(7812), pages 389-394, June.
    40. Ashraf, Badar Nadeem, 2020. "Stock markets’ reaction to COVID-19: Cases or fatalities?," Research in International Business and Finance, Elsevier, vol. 54(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kamal, Javed Bin & Wohar, Mark, 2023. "Heterogenous responses of stock markets to covid related news and sentiments: Evidence from the 1st year of pandemic," International Economics, Elsevier, vol. 173(C), pages 68-85.
    2. Christian M. Hafner, 2020. "The Spread of the Covid-19 Pandemic in Time and Space," IJERPH, MDPI, vol. 17(11), pages 1-13, May.
    3. Aharon, David Y. & Siev, Smadar, 2021. "COVID-19, government interventions and emerging capital markets performance," Research in International Business and Finance, Elsevier, vol. 58(C).
    4. Szymon Lis, 2022. "Investor Sentiment in Asset Pricing Models: A Review," Working Papers 2022-14, Faculty of Economic Sciences, University of Warsaw.
    5. Krzysztof Rząsa & Mateusz Ciski, 2022. "Influence of the Demographic, Social, and Environmental Factors on the COVID-19 Pandemic—Analysis of the Local Variations Using Geographically Weighted Regression," IJERPH, MDPI, vol. 19(19), pages 1-26, September.
    6. Harjoto, Maretno Agus & Rossi, Fabrizio & Lee, Robert & Sergi, Bruno S., 2021. "How do equity markets react to COVID-19? Evidence from emerging and developed countries," Journal of Economics and Business, Elsevier, vol. 115(C).
    7. Christian Beer & Janine Maniora & Christiane Pott, 2023. "COVID-19 pandemic and capital markets: the role of government responses," Journal of Business Economics, Springer, vol. 93(1), pages 11-57, January.
    8. Ashraf, Badar Nadeem, 2021. "Stock markets’ reaction to Covid-19: Moderating role of national culture," Finance Research Letters, Elsevier, vol. 41(C).
    9. Niculaescu, Corina E. & Sangiorgi, Ivan & Bell, Adrian R., 2023. "Does personal experience with COVID-19 impact investment decisions? Evidence from a survey of US retail investors," International Review of Financial Analysis, Elsevier, vol. 88(C).
    10. Al-Maadid, Alanoud & Alhazbi, Saleh & Al-Thelaya, Khaled, 2022. "Using machine learning to analyze the impact of coronavirus pandemic news on the stock markets in GCC countries," Research in International Business and Finance, Elsevier, vol. 61(C).
    11. Yousfi, Mohamed & Ben Zaied, Younes & Ben Cheikh, Nidhaleddine & Ben Lahouel, Béchir & Bouzgarrou, Houssem, 2021. "Effects of the COVID-19 pandemic on the US stock market and uncertainty: A comparative assessment between the first and second waves," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    12. Ștefan Cristian Gherghina & Daniel Ștefan Armeanu & Camelia Cătălina Joldeș, 2020. "Stock Market Reactions to COVID-19 Pandemic Outbreak: Quantitative Evidence from ARDL Bounds Tests and Granger Causality Analysis," IJERPH, MDPI, vol. 17(18), pages 1-35, September.
    13. Katarzyna Czech & Michał Wielechowski & Pavel Kotyza & Irena Benešová & Adriana Laputková, 2020. "Shaking Stability: COVID-19 Impact on the Visegrad Group Countries’ Financial Markets," Sustainability, MDPI, vol. 12(15), pages 1-19, August.
    14. Kanamura, Takashi, 2022. "Timing differences in the impact of Covid-19 on price volatility between assets," Finance Research Letters, Elsevier, vol. 46(PB).
    15. Mensi, Walid & Al Rababa'a, Abdel Razzaq & Vo, Xuan Vinh & Kang, Sang Hoon, 2021. "Asymmetric spillover and network connectedness between crude oil, gold, and Chinese sector stock markets," Energy Economics, Elsevier, vol. 98(C).
    16. Herjuna Qobush Izzahdi & Ani Wilujeng Suryani, 2023. "COVID-19 Vaccination, Government Strict Policy and Capital Market Volatility: Evidence from ASEAN Countries," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 117-135.
    17. Wang, Zhixuan & Dong, Yanli & Liu, Ailan, 2022. "How does China's stock market react to supply chain disruptions from COVID-19?," International Review of Financial Analysis, Elsevier, vol. 82(C).
    18. Ozkan, Oktay, 2021. "Impact of COVID-19 on stock market efficiency: Evidence from developed countries," Research in International Business and Finance, Elsevier, vol. 58(C).
    19. Baris Kocaarslan & Ugur Soytas, 2021. "The Asymmetric Impact of Funding Liquidity Risk on the Volatility of Stock Portfolios during the COVID-19 Crisis," Sustainability, MDPI, vol. 13(4), pages 1-12, February.
    20. Tong, Yuan & Wan, Ning & Dai, Xingyu & Bi, Xiaoyi & Wang, Qunwei, 2022. "China's energy stock market jumps: To what extent does the COVID-19 pandemic play a part?," Energy Economics, Elsevier, vol. 109(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jijerp:v:17:y:2020:i:20:p:7682-:d:432357. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.