National team intervention and price efficiency differentiation under the impact of COVID-19

ABSTRACT

This paper examines how the ‘national team’, a direct government investment policy, influences the price efficiency of listed companies in the Shanghai Stock Index (SSE). We find that stocks directly invested in by the national team show greater price efficiency than stocks without direct bailout. We also analyse the impact of the COVID-19 pandemic on this price efficiency differentiation. The data period is divided into two sub-periods, and the results show that the price efficiency of stocks decreased after COVID-19. The reduction in price efficiency is more notable for stocks with direct government investment; the difference observed under national team investment in price efficiency is clearly reduced. Increased pessimistic investor expectations due to the pandemic could explain these changes. Our study provides novel evidence for the policy evaluation of national team intervention and a more detailed explanation about the decrease in financial market efficiency in the post-COVID-19 era.

KEYWORDS:

• Government intervention
• national team
• COVID-19
• price efficiency

JEL CLASSIFICATION:

• G18

Acknowledgments

The project was funded by the National Natural Science Foundation of China (72101199, 11971372, and 11801433).

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The work was supported by the National Natural Science Foundation of China [11801433,11971372,72101199]