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Share pledge risk and government bailout fund

Author

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  • Xin Hong
  • Yang Hu
  • Wanting Zhang

Abstract

The effects of government bailouts have been extensively examined in the literature. This paper is one of the first to empirically examine the bailout funds established in China in 2018, which aimed to mitigate firms' liquidity squeeze risk caused by share pledges. Utilising a hand‐collected dataset of government bailout funds, this paper finds that stock prices increased when government introduced the bailout fund plan, especially for non‐state‐owned enterprises (SOEs) and firms with small size and share pledges. Long‐term performance of bailed out firms increased as well. Overall, our results provide new evidence that government bailouts have positive effects on financial markets.

Suggested Citation

  • Xin Hong & Yang Hu & Wanting Zhang, 2022. "Share pledge risk and government bailout fund," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(5), pages 4831-4848, December.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:5:p:4831-4848
    DOI: 10.1111/acfi.13010
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    References listed on IDEAS

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