The effectiveness of government stock purchase during market crash: Evidence from China

Minying Cheng, Ling Jin, Zhisheng Li and Bingxuan Lin

Pacific-Basin Finance Journal, 2022, vol. 71, issue C

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.

Keywords: Government intervention; Crash risk; Synchronicity; China (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:71:y:2022:i:c:s0927538x22000014

DOI: 10.1016/j.pacfin.2022.101706

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