Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 26, 2022 erstellt
Beschreibung:
We study the effects of implicit government guarantees (IGG) for corporate debt on the trading behavior of retail stock investors, exploiting the first case of corporate bond defaults in March 2014 in China as a negative shock to the public expectation of IGG. The difference-in-differences analysis shows that retail investors retreat from stocks issued by firms of high default risk after the credit shock, which is unlikely driven by industry contagion, deterioration in firm performance, or seasonal effects. The effect is stronger for non-SOEs or firms that rely more on one-time earnings before the shock. However, when the first default shows signs of a bailout, there is a partial reversal of retail investors’ retreat. Taken together, withdrawing IGG appears to help reduce stock retail investors’ moral hazard and lead them to pay more attention to firms’ fundamentals, which benefits capital allocation in China’s stock market