Description:
AbstractThis paper examines the effect of national team intervention, a direct financial intervention in the Chinese stock market, on overinvestment among Chinese energy firms. We argue that the choice of the national team as an information release in the stock market can become a decision basis for other investors and executives, thus influencing the market performance of listed firms and subsequently overinvestment. Our results show that national team intervention is negatively associated with overinvestment and positively associated with investment efficiency. The mechanism may lie in the existence of a disincentive to new investment and stock returns. Furthermore, these effects are strengthened when the firms are actually controlled by local governments. Our results are robust to different estimation methods and variable settings