The National Team: Stock market interventions and corporate catering behavior

Yasir Shahab, Chong-xiao Wang, P. Eric Yeung and Jia-nan Zhou

International Review of Financial Analysis, 2024, vol. 93, issue C

Abstract: We examine corporate catering behavior following the Chinese government's stock market interventions in 2015, which result in significant stock overvaluation. The government's direct share purchases cause higher levels of horizontal agency conflicts between the controlling and minority shareholders, and the affected firms are more likely to cater to the controlling shareholders and top executives' aversion to receiving overvalued stocks. We focus on the changes in stock dividends and equity-based executive compensation and find evidence consistent with the catering hypothesis while employing difference-in-difference approach. Our study demonstrates the intricate interactions between state interventions and corporate decisions.

Keywords: Market intervention; Overvaluation; Catering behavior; Equity compensation; Stock dividends (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:93:y:2024:i:c:s1057521924001352

DOI: 10.1016/j.irfa.2024.103203

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