The Impact Of Natural Disasters On The Stock Price Crash Risk Of Listed Companies

Under the influence of global warming and climate change,the frequency and intensity of natural disasters are on the rise.China is a hot spot affected by natural disasters.In January 2023,the Ministry of Emergency Management released the basic statistics of natural disasters in 2022,which showed that a total of 112 million people were affected by natural disasters and the direct economic losses amounted to 238.65 billion yuan.Generally speaking,due to the vast territory,various types of natural disasters,high outbreak rate,and wide range of hazards,natural disasters not only cause the loss of physical assets in the affected areas,but also trigger the panic and pessimistic expectations of the masses,which will be transmitted to the financial market and bring about large fluctuations in stock prices.This paper takes all listed companies in China’s A-share market from 2011 to 2021 as samples,makes manual statistics on the amount and frequency of losses caused by natural disasters,and empirically tests the impact of natural disasters in the provinces where listed companies are registered on stock price crash risk in the past ten years.The results show that(1)natural disasters significantly increase the stock price crash risk of listed companies,and the performance of companies in the secondary and tertiary industries is particularly obvious;(2)Natural disasters further amplify the risk of stock price collapse by causing market investor sentiment fluctuations and the deterioration of the company’s fundamental condition;(3)Listed companies can resist the risk of stock price collapse under the impact of natural disasters by increasing cash holdings through financial flexibility strategy.The innovation of this paper is embodied in the research perspective and research content.Firstly,from the perspective of research,this paper discusses the impact of natural disaster,an exogenous variable,on the stock price crash risk of listed companies,rather than the discussion of factors in the economic field.Secondly,in terms of research content,this paper starts from the annual total amount of damage caused by natural disasters instead of using the event study method used by most scholars.In addition,previous literature has not yet discussed the mechanism of natural disasters’ effect on stock price crash risk.In this paper,combined with theoretical analysis,the paper studies from the two major channels that natural disasters will cause investor sentiment fluctuations and the company’s fundamental situation changes,and puts forward the conclusion that improving companies’ financial flexibility can mitigate the impact of natural disasters on stock price crash risk.