Do investors reward corporate integrity? Evidence from stake-raising commitments in China’s A-share market

This study examines how investors perceive a company’s adherence to its commitments. While existing research largely focuses on investors’ reactions to single reputation-related events, a deeper insight into investors’ perceptions of corporate credibility can be achieved by observing their responses to recurring events. The Chinese A-share market provides an ideal setting for this research, as major shareholders and executives of listed companies frequently announce stake-raising commitments (i.e., commitments to purchase additional shares), allowing for an analysis of investor reactions to repeated occurrences. Using a sample of stake-raising plans announced by A-share listed companies from July 2015 to 2022, this study finds that companies with stronger historical credibility receive more favorable evaluations and improved investor sentiment when issuing new stake-raising plans. However, investors’ actual trading behavior becomes more conservative, as many adopt a wait-and-see approach, revealing a discrepancy between their words and actions. The impact of historical credibility differs by state ownership, company size, and market performance. Furthermore, companies with higher historical credibility are more likely to fulfill new commitments as they value their reputation. They emphasize investors’ actions (“voting with their feet”) over verbal feedback.