RESEARCH ARTICLE
The capital market consequences of stock market liberalisation: Evidence from Mainland-Hong Kong Stock Connect Programs in China
Renhui Fu,
Fang Gao,
Yi Zhao,
Renhui Fu
Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China
Search for more papers by this authorFang Gao
Glorious Sun School of Business and Management, Donghua University, Shanghai, China
Search for more papers by this authorCorresponding Author
Yi Zhao
International Business School, Henan University, Henan, China
Correspondence
Yi Zhao, International Business School, Henan University, Henan, China.
Email: [email protected]
Search for more papers by this authorRenhui Fu,
Fang Gao,
Yi Zhao,
Renhui Fu
Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China
Search for more papers by this authorFang Gao
Glorious Sun School of Business and Management, Donghua University, Shanghai, China
Search for more papers by this authorCorresponding Author
Yi Zhao
International Business School, Henan University, Henan, China
Correspondence
Yi Zhao, International Business School, Henan University, Henan, China.
Email: [email protected]
Search for more papers by this authorAbstract
We analyse the capital market consequences of stock market liberalisation in a quasi-natural experiment setting, where Mainland-Hong Kong Stock Connect Programs allow foreign investors to trade in the Chinese stock market. Utilising difference-in-differences estimations, we observe improved stock liquidity, driven by direct liquidity provision and indirect signals to domestic investors. Particularly notable are the effects on eligible stocks without previous exposure to foreign investors, characterised by high corporate transparency and investor protection. The resulting liquidity enhancements reduce equity costs, ultimately elevating firm value. In short, our study highlights the positive influence of stock market liberalisation on the capital market.
Open Research
DATA AVAILABILITY STATEMENT
The data that support the findings of this study are available from the corresponding author upon reasonable request.
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