Stock Liquidity and Investment Efficiency: Evidence from the New Regulation of Insider Selling in China

Mengqin Zhang (), Yi He (), Surui Zhang (), Xiang Zhang (), Stavros Sindakis () and Saloome Showkat ()
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Mengqin Zhang: Tianfu College of Swufe
Yi He: Work Committee for Offices Directly Under
Surui Zhang: Chongqing Technology and Business University
Xiang Zhang: Chongqing University of Technology
Stavros Sindakis: Hellenic Open University
Saloome Showkat: Institute of Strategy, Entrepreneurship and Education for Growth

Journal of the Knowledge Economy, 2024, vol. 15, issue 2, No 138, 8563-8587

Abstract: Abstract The study examines the causal effect of stock liquidity on investment efficiency in the Chinese context. We employ the New Regulation of Insider Selling (NRIS) of China as a quasi-natural experiment that restrains large shareholders’ stock liquidity. With a sample from 2015 to 2021, our findings reveal that investment efficiency increases with the NRIS, which means that the decrease in stock liquidity significantly increases investment efficiency. Moreover, we also investigate the heterogenous impact across different firms; more specifically, the effect of the NRIS is attenuated for state-owned firms, and this impact is more pronounced for smaller firms. This research contributes to the advancement of knowledge related to the interactions between finance and the economy and how these interactions can affect economic growth and development.

Keywords: Investment efficiency; New regulation of insider selling; Stock liquidity; Chinese stock market (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s13132-023-01431-5

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