Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/329438 
Year of Publication: 
2025
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 13 [Issue:] 6 [Article No.:] 158 [Year:] 2025 [Pages:] 1-24
Publisher: 
MDPI, Basel
Abstract: 
This study investigates the causal impact of stock price crash risk on the cost of equity (COE) in China's segmented A- and B-share markets with an emphasis on ownership structures and market regimes. Employing a bootstrap panel Granger causality framework, Markov-switching dynamic regression, and panel threshold regression models, the analysis reveals that heightened crash risk significantly increases COE, with the effects being more pronounced for A-shares because of domestic investors' heightened risk sensitivity. This relationship further intensifies in bull markets, where investor optimism amplifies downside risk perceptions. Ownership segmentation plays a critical role, as foreign investors in B-shares exhibit weaker reliance on firm-level valuation metrics, favoring broader risk-diversification strategies. These findings offer actionable insights into corporate risk management, investor decision making, and policy formulation in segmented and emerging equity markets.
Subjects: 
cost of equity
stock price crash risk
causality
bull market
bear market
JEL: 
G10
G15
G32
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article

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