The Impact of Economic Policy Uncertainty on Stock Price Crash Risk with Information Asymmetry as a Moderating Variable: Evidence from Egyptian Exchange

Document Type : Original Article

Authors

1 Management Sciences Department, Akhbar Alyom Academy

2 School of Business, International Academy for Engineering & Media Science

3 Higher Institute for Managerial Sciences Janaklees, El-Beheira

Abstract

This study investigates the dynamic relationship between economic policy uncertainty (EPU), information asymmetry, and stock price crash risk on the Egyptian Exchange (EGX). The study uses data from 21 nonfinancial firms listed on the Egyptian exchange between 2014 and 2023 to investigate the moderating roles of information asymmetry between economic policy uncertainty and stock price crash risk. It tests hypotheses using cross-sectional analysis and hierarchical regression analyses based on 210 observations. Economic policy uncertainty (EPU) alters investor behavior in financial markets, making it challenging for investors to assess a company's risk and performance. This, in turn, increases the probability of stock price decline upon the revelation of such hidden information. Cross-sectional analysis proved that economic policy uncertainty accounted for 47.4% of stock price crash risk. Information asymmetry enhanced this to 71.21%, demonstrating its influential role in explaining the change in stock price crash risk. Hierarchical regression analysis showed that economic policy uncertainty accounted for 29.9% of stock price crash risk. Information asymmetry enhanced this to 51.2%, demonstrating its influential role in explaining the stock price crash risk change.
The study highlights the critical role of information asymmetry in amplifying the impact of EPU on stock price crash risk. The study provides valuable insights for policymakers, corporate leaders, and market participants to navigate the challenges of this dynamic and evolving financial landscape

Keywords

MSA-Management Sciences Journal
Volume 4, Issue 1
January 2025
Pages 1-44

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