The effectiveness of government stock purchase during market crash: Evidence from China
Document Type
Article
Date of Original Version
2-1-2022
Abstract
During the Chinese stock market crash in 2015, the Chinese government formed a “national team” to directly purchase stocks of more than 1000 firms. We find that the national team's interventions lower the stock price crash risk for these firms; however, they also increase stock price synchronicity, transaction cost and decrease idiosyncratic information. The stabilizing role of the “national team” disappears in the long run after the crisis period. Firms with more noise traders and a lower level of investor confidence benefit more from the national team ownership, consistent with the conjecture that the national team improves market liquidity and investor confidence.
Publication Title, e.g., Journal
Pacific Basin Finance Journal
Volume
71
Citation/Publisher Attribution
Cheng, Minying, Ling Jin, Zhisheng Li, and Bingxuan Lin. "The effectiveness of government stock purchase during market crash: Evidence from China." Pacific Basin Finance Journal 71, (2022). doi: 10.1016/j.pacfin.2022.101706.