Does the liberalization of stock market optimize firm's debt? Evidence from a policy experiment in China

Yunxin Yi

Finance Research Letters, 2023, vol. 58, issue PB

Abstract: This paper studies the impact of capital market opening on firm's financing in a typical developing market, China. We introduce the policy shock of China-Hong Kong Stock Connects to examine the mismatching between firms’ debt and investment. Our results show that the opening of capital market significantly reduces the mismatch between firms’ debt and investment. One possible mechanism is that the increase of information transparency with the China-Hong Kong Stock connects, which is confirmed by the moderating role of analyst coverage on the main effect. These findings enrich our understanding on the economic consequences of the stock market liberalization.

Keywords: Stock market liberalization; China-Hong Kong stock connects; Investment; Debt (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pb:s1544612323007675

DOI: 10.1016/j.frl.2023.104395

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