Pay inequality for stability? Investment preference of the national team intervention in Chinese stock market

We examine the factors that affect the investment decisions of the “national team”, a direct intervention dominated by the central government in the Chinese stock market. By describing the investment preferences of the national team, we discuss the objectives of the intervention policy in implementation. We find that larger firms are more likely to receive investment. The national team prefers undervalued firms and is positively related to future stock returns. We also find that firms under central government control are more likely to receive investment from the national team. This may cause these investments to be relatively inefficient. We provide novel evidence to evaluate the policy and the positioning of the national team in terms of rationality, fairness, and efficiency, and we reveal a potential mechanism by which government intervention in financial markets may cause inequality in the real economy.