Effects of Financial Market Information on Firms’ Productivity Under Operating Pressure and Financial Constraints: Evidence From the Chinese Stock Market

Fujun Lai, Sha Zhu, Qingxiang Feng and Yi Yao

SAGE Open, 2021, vol. 11, issue 4, 21582440211061377

Abstract: Many studies have examined the impact of economic fundamentals on the financial market, but few have explored how financial market information affects the real economy. In this paper, we examine the effects of stock price informativeness on firms’ total factor productivity (TFP) using panel data of Chinese listed manufacturing firms over the period 2007 to 2017. Specifically, we use stock price nonsynchronicity to measure stock price informativeness, and real economic activity efficiency is proxied by the listed firms’ total factor productivity estimated by the LP and ACF methods. We find that stock price informativeness is positively associated with firms’ productivity in China. More importantly, we propose two possible mechanisms to intensify the consequences of stock price informativeness and find that operating pressure and financial constraints can positively intensify the relationship between stock price informativeness and firms’ TFP. As financial information is crucial for sustainable and steady economic growth, our research not only helps to reveal how the financial market promotes economic growth but also helps to provide new ideas for managers and policy-makers to alleviate operating pressure and financing constraints.

Keywords: financial market efficiency; real economy; stock price informativeness; financial information; total factor productivity (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:11:y:2021:i:4:p:21582440211061377

DOI: 10.1177/21582440211061377

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