2.3.2. Cross-Sectional Analyses
To support the theory and main hypothesis that the regional continued increasing public health threats influence the local firms’ market performance by enhancing the environmental uncertainty and investors’ risk assessment, we propose two sets of cross-sectional predictions that analyze the variation in the regional public health threats-oriented uncertainty and risk assessment.
One crucial channel underlying H1 is that continued increasing provincial public health threats can influence investor sentiment, thus enhance the risk assessment. Prior research suggests that information asymmetry has an effect on investor sentiment [41,42,43]. Specifically, Schmeling [42] finds that information asymmetry amplifies the negative effect of sentiment on future stock returns based on the cross-country evidence. In the case of regional information accessibility, we conjecture that if the investor could access more regional information, they will be less sentiment about increasing threats. We expect that stronger information accessibility will decrease the investors’ risk assessment by mitigating the information asymmetry. Consistent with this notion, Chakravarty et al. [44] apply the number of news reports as an inverse measure of information asymmetry and find that the number of news reports reduces the magnitude of the price discount. In addition, Bonsall et al. [45] find that wider media coverage, in terms of the news article number regarding earnings announcement, relates to the improvement in investor informedness during periods of higher market uncertainty. Base on the discussion, our first cross-sectional hypothesis is as follows (in an alternative form):
Hypothesis 2a (H2a).    The negative effect of continued increasing provincial public health threats on market reaction, as hypothesized in H1, is less pronounced when the provincial information accessibility is stronger.
For the primary hypothesis, we assume that provincial continued increasing threats reduce the local firms’ stock market performance because such circumstances can enhance the uncertainty and investors’ risk assessment. However, if such circumstances occurred in a province where shows strong economic growth, then investors will have a lower level of risk assessment to constrain the investment. Prior studies documents that long-term equity premium is related to economic growth [46,47]. Moreover, Ludvigson [48] shows that economic activities relate to consumer confidence, and Chen [49] finds that a lack of consumer confidence leads to a higher likelihood of turning to a bearish stock market. Taken together, we suppose that stronger economic growth will decrease the investors’ risk assessment by enhancing the likelihood to have a positive outlook on the future market performance. Our second cross-sectional hypothesis is as follows (in an alternative form):
Hypothesis 2b (H2b).    The negative effect of continued increasing provincial public health threats on market reaction, as hypothesized in H1, is less pronounced when the provincial economic growth is stronger.