Do government-guided funds "guide" the transregional mobility of capital? Evidence from cross-city equity investments

Kai Peng, Fang Yu, Dongmin Kong, Yang Li and Ruihang Geng

Finance Research Letters, 2024, vol. 66, issue C

Abstract: The study tries to evaluate and explain the influence of government-guided funds (GGFs) on the transregional mobility of equity capital. We employ spatial econometrics to investigate the spatial effects of GGFs on the mobility of equity capital. Using data on cross-city equity investments of A share listed companies in 335 Chinese cities from 2007 to 2021, we first develop a novel measure of Chinese capital mobility. We find a V-shaped correlation between GGFs and the flow of equity capital. Notably, reducing market segmentation and enhancing native identity are two important mechanisms by which GGFs facilitate the influx of equity capital into local regions. Also, GGFs show a significant spatial spillover effect on neighboring cities. The results still hold after a series of robustness tests and heterogeneity tests.

Keywords: Government-guided funds; Equity investment; Capital mobility; Spatial durbin model (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:66:y:2024:i:c:s1544612324006913

DOI: 10.1016/j.frl.2024.105661

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