Does overcapacity prompt controlling shareholders to play a propping role for listed companies?

A major risk currently facing the Chinese economy is overcapacity, which affects efficiency of social resource allocation (Xi et al., 2017; Huang 2019). When a company in crisis, internal capital market often plays propping role. This study approached this issue from perspective controlling shareholder and examined whether shareholders provide financial support to enterprises industries with excess capacity. According data for China’s A-share listed companies 2007 2019, capacity received more compared those non-overcapacity industries. Analysis mechanism revealed that state-owned relatively poor status shareholders. also economic consequences such found it conducive enhancing enterprise value. enriches literature on overcapacity markets by demonstrating play role industry-level crises. finding has both theoretical value practical implications related supply-side reform reduction.