 Stock market liberalization and corporate investment revisited: Evidence from ChinaZhisheng Li, Chun Liu, Xiaoran Ni and Jiaren Pang Journal of Banking & Finance, 2024, vol. 158, issue C Abstract: Recent reform in China has made a subset of Chinese stocks available to foreign investors, partially opening up China's stock market. Our difference-in-differences analysis shows that this liberalization reform boosts investments in investable firms relative to noninvestable ones, with results robust to various sensitivity analyses. Besides capital inflows and risk sharing, a potential but underexplored channel is improved corporate governance due to direct and indirect pressures from foreign investors, which lowers the cost of capital and improves capital allocation efficiency. Consistent with this corporate governance channel, we find that the liberalization reform reduces investable firms’ agency costs, increases their investment efficiency and total factor productivity, and improves their operating performance. Further analysis finds that the positive investment effect from the liberalization reform is stronger among firms that were poorly governed before the reform. Keywords: Stock market liberalization; Stock connect; Corporate investment; Corporate governance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:158:y:2024:i:c:s037842662300239x DOI: 10.1016/j.jbankfin.2023.107053 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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