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Dr Thanaset Chevapatrakul

Nottingham University

Abstract: We show that firm-specific exposure to the US climate change regulation increases the risk of stock price crash. Employing President Trump’s surprise victory to leverage a natural experiment, we estimate the difference-in-differences (DiD) models using firm-level data around the 2016 US Presidential Election. Our results demonstrate that, after Trump became President in 2017, firms that were exposed to climate change regulation prior to Trump’s surprise election win saw their crash risk fall disproportionately compared to firms that were not exposed to the climate rules. We also find that firms which were exposed to the climate change rules were likely to experience a price crash that coincided with a break in the string of successive earnings increases. They also tended to submit 10Ks that were larger in size in an attempt to conceal unfavourable information. Results of the placebo tests show no discernible effect of exposure to climate regulation on the risk of stock price