Do listed companies fulfill their public commitments? Evidence from the stake-raising commitments of Chinese companies

This study investigates the motivations of listed companies to make public commitments and examines if they do fulfill them. A suitable research scenario exists for this in China. During the stock market crash of 2015 in China, the China Securities Regulatory Commission (CSRC) encouraged major shareholders and executives of listed companies to increase their shareholdings to stabilize stock prices. Since then, many listed companies have officially released stake-raising commitments. This study examines the motivations behind these promises and whether they are fulfilled. I examine the stake-raising plans issued by China's A-share listed companies from July 2015 to June 2019, and find that the main motivations for these commitments are self-interest and external pressure (including political and peer pressure), rather than the signaling of undervaluation. Subsequently, the motivations of value signaling and peer effect significantly increase the possibility of commitments being fulfilled, whereas self-interest decreases this possibility. Further research shows that the strength of commitment plays a mediating role between motivation and fulfillment. Moreover, a stronger commitment boosts the stock price more in the short term. If the commitment is fulfilled on time, the short- and long-term market performance of the company's stock improves, and the stock price crash risk decreases.