Research On The Impact Of Direct Government Intervention On Crash Risk

During the stock market crash in 2015,the Chinese government used a variety of policy tools to rescue the market.Among them,the special one is that the government directly intervenes in the stock market,that is,the national team directly buys and sells stocks in the stock market.After the stock disaster,the national team is still actively trading on the stock market.However,the government's status as a trader has caused market concerns that whether the government can simultaneously serve as the referee and the athlete and whether the size of the intervention is controllable has raised investor concerns.This paper uses the national team's shareholding ratio as a proxy variable for direct government intervention in the stock market.The fixed effect panel model proves that direct government intervention in the stock market can reduce the crash risk.And the Sequential test proves that national team achieve this by providing liquidity,changing the stock price information structure.Furthermore,the sample group regression proves that when investors are pessimistic,the effect is stronger.This paper believes that the government's direct intervention in the stock market is aimed at maintaining market stability and promoting the development of the stock market,that is,to lower the crash risk and increase the information content of stock prices.However,the research results in this paper shows that the national team has played an active role in maintaining the stability of stock market while incurring the cost of damaging the quality of the market,that is,reducing the information content of the stock price,causing the stock market price to deviate from its intrinsic value.Therefore,the national team should make appropriate intervention after weighing the two goals of reducing stock price volatility and increasing stock information content to maximize its positive effect.