Market feedback : evidence from the horse's mouth

We surveyed all Chinese public firms in 2019 and 2022 to examine the real effects of financial markets. The response rates were close to 100%. More than 90% of firms reported that they care about the stock market for the purposes of learning information to guide real investment decisions and of accessing external financing. These findings provide direct evidence for the wide existence of market feedback through a learning channel and a financing channel. We analyze firms’ responses and how they relate to firm characteristics and actions, and provide direct evidence about what firms learn from the stock prices. We also show what firms do is highly consistent with what they report by exploring their actions on trading suspensions. Overall, our analysis suggests that financial markets are not only a side show, but instead, do affect the real economy