Does carbon price uncertainty affect stock price crash risk? Evidence from Europe

This study examines the effect of carbon price uncertainty on stock price crash risk. Based on the 2023 article ‘Does carbon price uncertainty affect stock price crash risk? Evidence from China’ by Ren et al., we perform a similar analysis utilizing the dynamic panel model on the data of European listed firms from 2005 to 2025, present in the STOXX Europe 600. Then we will consider the two underlying channels through which carbon price uncertainty induces stock price crashes: managers' hoarding of bad news and investors' heterogeneity, therefore performing channel testing. After that, we will conduct a cross-sectional analysis from both an inside and outside point of view of the firm. Continuing, we will analyze the impact of carbon price uncertainty between heavily polluting and not heavily polluting industries and during the post-period of the Paris Agreement, adapting the setting to a European environment and drawing adequate conclusions. As a last step, we will compare the two studies in search of common points and differences.