The Impact of People’s Bank of China’s Decision During Covid-19 on Chinese Financial Stock market

Abstract

COVID-19 has had a huge negative impact on the Chinese economy. As one of the institutions that issued relevant economic policies, the people's Bank of China decided to reduce the deposit reserve ratio on July 15, 2021, to improve the liquidity of the banking system. This paper aims to study the impact of the people's Bank of China's policy of reducing the deposit reserve ratio on the stocks of Chinese financial companies during the epidemic period. The event study is used in this paper to analyze the data of 39 Chinese listed financial companies. By comparing the normal rate of return in the estimated period with the stock rate of return in the event period, this paper judges whether there is an abnormal rate of return and whether the abnormal rate of return is positive or negative, so as to study whether the measure of the people's Bank of China to reduce the deposit reserve ratio has an impact on the stocks of Chinese financial companies and whether the impact is positive or negative.