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

Gaoke Liao, Peng Hou, Xiaoyan Shen, Khaldoon Albitar

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    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.
    Original languageEnglish
    Article number0
    Pages (from-to)1-7
    Number of pages7
    JournalInternational Journal of Finance and Economics
    Volume0
    Issue number0
    Early online date9 Aug 2020
    DOIs
    Publication statusEarly online - 9 Aug 2020

    Keywords

    • Economic Policy Uncertainty
    • Stock Returns
    • Generalized Dynamic Factor Model
    • Corporate Environmental Responsibility

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