Non-financial information uncertainty, firm growth, and market value during crisis: Evidence from China

Abstract

This study investigates the impact of non-financial information uncertainty on market valuation during times of crisis. Using a sample of the largest listed firms in China and measuring non-financial information uncertainty through governance rating divergence, we find that firms with higher non-financial information uncertainty experienced a more significant and negative market reaction during the COVID-19 crisis compared to firms with low non-financial information uncertainty. Although stock prices of firms with robust growth opportunities are more resilient to the pandemic, non-financial information uncertainty mitigates the positive effect of firm growth on stock market reactions to the COVID-19 outbreak, indicating that corporate resilience to crisis is compromised by non-financial information uncertainty. A further analysis suggests that dual listing in mainland China and Hong Kong stock markets mitigates the negative effect of non-financial information uncertainty on stock market valuation, attributable to the higher quality of non-financial disclosure by these firms. Overall, this study sheds light on the unique role of non-financial information uncertainty in stock market valuation and stock price resilience during crises.