Disaster Shocks and Equity Market Behavior: Moderating Role of Asset Tangibility

Abstract

Natural disasters affect the business activities and consequently investors’ sentiments. The objective of the current study is to examine the effect of floods occurred in 2010 and 2022 on stock returns of manufacturing firms. Multiple regression analysis has been used to test the hypotheses. The results provide evidence of positive effect of 2010 flood and negative effect of 2022 flood on stock returns of manufacturing firms. Various factor contributing to these opposite effects have been described. Moreover, asset tangibility moderates the linkage between natural disasters and stock returns. These results emphasize the importance of flood resilient infrastructure. The results of the study provide valuable insights about the investors’ behavior during different political and economic conditions and guide the policy makers regarding steps to minimize the effect of disasters on investors’ sentiments.