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Reducing stock price synchronicity: How government-driven long-term capital cultivation improves market efficiency in China

Author

Listed:
  • Gao, Bin
  • Song, Tao
  • Han, Xiao
  • Zhang, Jinlong

Abstract

Using provincial government work reports (2011−2023) and A-share listed firm data, we develop a text-based index of regional governmental patience in capital cultivation and examine its impact on capital market pricing efficiency. We find that government cultivation of long-term capital significantly reduces corporate share price synchronization. This conclusion remains robust after conducting rigorous tests, including variable substitution and model specification adjustments. We reason that the long-term capital policy cultivation effect mitigates information asymmetry through three primary channels: enhancing analysts' research tracking, increasing institutional investors' attention, and improving media information disclosure. These channels collectively contribute to reducing stock price synchronization. The heterogeneity test demonstrates that the stock price synchronization reduction effect is more pronounced in state-owned enterprises, high-competition industries, policy-supported sectors, and regions with underdeveloped financial markets. Our study provides new empirical evidence on capital market development through the lens of governmental long-term capital cultivation.

Suggested Citation

  • Gao, Bin & Song, Tao & Han, Xiao & Zhang, Jinlong, 2026. "Reducing stock price synchronicity: How government-driven long-term capital cultivation improves market efficiency in China," Pacific-Basin Finance Journal, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:pacfin:v:95:y:2026:i:c:s0927538x25003191
    DOI: 10.1016/j.pacfin.2025.102982
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • P34 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Finance

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