Macroeconomic uncertainty and stock price crash risk: the moderating roles of operating performance and investor sentiment

This paper investigates the association between macroeconomic uncertainty and stock price crash risk and the two potential mechanisms through which the former may affect the latter, namely firms' operating performance and firm-specific investor sentiment, based on a sample of listed firms from six Asia-Pacific countries (Japan, Singapore, South Korea, Malaysia, China and Indonesia) for the period 2009 to 2019. Sub-sample analyses are also conducted, where the sample firms are segregated into developed and developing countries. The empirical results show that macroeconomic uncertainty has a significant positive relationship with stock price crash risk for the full sample and firms in both the developed and developing countries. Subsequent analyses reveal that good operating performance strengthens the positive relationship between these variables for the full sample but the opposite holds true for firms in the developing countries. Furthermore, we find that higher firm-specific investor sentiment strengthens the positive association between these variables for the full sample and firms in the developing countries.