Does stock market rescue affect investment efficiency in the real sector?

Ling Jin, Zhisheng Li, Lei Lu and Xiaoran Ni

Journal of Financial Markets, 2023, vol. 65, issue C

Abstract: During China's stock market crash in 2015, the government purchased the stocks of over 1000 firms. We investigate how this government rescue affects investment efficiency and show that rescued firms experience a significant decrease in investment-q sensitivity. This rescue has an adverse impact on price efficiency and impedes managers from learning information for investment decisions. The learning channel is the main mechanism through which the rescue has a real effect. Our findings indicate that programs intended to stabilize the stock market could adversely affect the real efficiency, providing new insight into the consequences of government purchases.

Keywords: Stock market rescue; Government intervention; Investment efficiency; Learning from prices (search for similar items in EconPapers)
JEL-codes: G31 G34 G38 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:65:y:2023:i:c:s1386418123000575

DOI: 10.1016/j.finmar.2023.100859

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