Prior studies have demonstrated that market timing is an important factor in determining firm investments and financing policies. We provide empirical evidence on the effects of market timing on equity-based compensation and stock dividend decisions. To avoid endogeneity, we exploit the setting of overvaluation resulting from the 2015 Chinese government’s open-market purchases of common stocks of public firms. We test whether the over-valued firms cater to managers’ and investors’ preferences of not receiving over-valued shares. Consistent with this catering hypotheses, we find that firms purchased by the government are less likely to issue equity-based compensation and stock dividends after government’s stock market intervention relative to other firms whose shares were not purchased by the government. These results are more pronounced when the over-valuation is likely driven by retail investors.
Hai-xia Li ;
P. Eric Yeung ;
Jia-nan Zhou ;
Market Timing and Corporate Catering: Evidence on Equity-based Compensation and Stock Dividends （2022年10月25日）http://www.cfrn.com.cn//lw/gsjr/glzclw/b563f313df52413cbe9718a5d92aa66d.htm