Government Intervention and Capital Market Welfare: A Comprehensive Analysis of "National Team" Shareholding

Abstract

Since the 2015 stock market crash, China's "national team" funds have persistently intervened in the equity market as a stabilizing force. Based on the data of A-share listed companies in Shanghai and Shenzhen from 2015 to 2023, this paper comprehensively evaluates the welfare impact of "national team" shareholding on investors, listed firms and the overall capital market. We find that "national team" shareholding significantly increases investors' dividend yields and improves firms' return on capital, long-term market value and transparency of information disclosure. At the market level, "national team" interventions dampen market volatility and enhance market liquidity and stability. However, while promoting stability, these interventions also increase stock price synchronization and thus reduce pricing efficiency, indicating certain negative side effects. Our research provides empirical evidence on the welfare implications of direct government participation in the stock market and offers policy insights for optimizing the operation of "national team" funds to achieve effective yet efficient intervention.