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The impact of economic policy uncertainty on stock returns: The role of corporate environmental responsibility engagement

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  • Gaoke Liao
  • Peng Hou
  • Xiaoyan Shen
  • Khaldoon Albitar

Abstract

This paper examines the impact of economic policy uncertainty (EPU) on market‐driven common stock returns and individual‐driven idiosyncratic stock returns as well as explores the role of corporate environmental responsibility (CER) engagement on this impact based on a sample of 175 firms listed on Shanghai and Shenzhen 300 index from 2008 to 2016. The results show that an increase in EPU significantly reduces the market‐driven common stock returns but increases individual‐driven idiosyncratic stock returns. Further, EPU has a lower negative impact on the common stock returns of high‐CER firms comparing with low‐CER firms. EPU has a higher positive impact on idiosyncratic stock returns of high‐CER firms comparing with low‐CER firms. Overall, the findings of this paper extremely relevant for the government, investors and firm's managers and can be utilised for policy and investment decision‐making.

Suggested Citation

  • Gaoke Liao & Peng Hou & Xiaoyan Shen & Khaldoon Albitar, 2021. "The impact of economic policy uncertainty on stock returns: The role of corporate environmental responsibility engagement," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(3), pages 4386-4392, July.
    • Handle: RePEc:wly:ijfiec:v:26:y:2021:i:3:p:4386-4392
    DOI: 10.1002/ijfe.2020
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    Cited by:

    1. Liu, Xiaojun & Wang, Yunyuan & Du, Wanying & Ma, Yong, 2022. "Economic policy uncertainty, oil price volatility and stock market returns: Evidence from a nonlinear model," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    2. Mengxin Wang & Gaoke Liao & Yanling Li, 2021. "The Relationship between Environmental Regulation, Pollution and Corporate Environmental Responsibility," IJERPH, MDPI, vol. 18(15), pages 1-13, July.
    3. Tanveer Bagh & Abdul Waheed & Muhammad Asif Khan & Mirza Muhammad Naseer, 2023. "Effect of Economic Policy Uncertainty on China’s Stock Price Index: A Comprehensive Analysis Using Wavelet Coherence Approach," SAGE Open, , vol. 13(4), pages 21582440231, December.
    4. Marc Ringel & Saranda Mjekic, 2023. "Analyzing the Role of Banks in Providing Green Finance for Retail Customers: The Case of Germany," Sustainability, MDPI, vol. 15(11), pages 1-24, May.
    5. Khaldoon Albitar & Tony Abdoush & Khaled Hussainey, 2023. "Do corporate governance mechanisms and ESG disclosure drive CSR narrative tones?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 3876-3890, October.
    6. Cristiane Gea & Marcelo Cabus Klotzle & Luciano Vereda & Antonio Carlos Figueiredo Pinto, 2023. "Pricing uncertainty in the Brazilian stock market: do size and sustainability matter?," SN Business & Economics, Springer, vol. 3(1), pages 1-37, January.
    7. Yue Liu & Pierre Failler & Zhiying Liu, 2022. "Impact of Environmental Regulations on Energy Efficiency: A Case Study of China’s Air Pollution Prevention and Control Action Plan," Sustainability, MDPI, vol. 14(6), pages 1-21, March.
    8. Abiodun Moses Adetokunbo & Afe Success Mevhare, 2024. "The interconnectivity between green stocks, oil prices, and uncertainty surrounding economic policy: indications from the United States," SN Business & Economics, Springer, vol. 4(2), pages 1-26, February.

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