Registration reform and stock mispricing: Causal inference based on double machine learning

Yewen Wang, Jiaxuan Tang and Cheng Li

Research in International Business and Finance, 2025, vol. 73, issue PB

Abstract: The reform of the capital market registration system will affect not only the pricing of issuance in the primary market but also the pricing of circulation in the secondary market. This article evaluates the effects of fundamental institutional reforms in the capital market from the perspective of stock mispricing in the secondary market. The study finds that the registration system reform reduces stock mispricing in the secondary market, producing significant spillover effects. Mechanism analysis indicates that the registration system reform, centered on information, reduces stock mispricing by mitigating two types of agency problems and suppressing investor sentiment. This effect of rational pricing is more pronounced in companies with good internal governance and high external attention. Further analysis shows that the registration system reform primarily corrects the mispricing of undervalued stocks. These findings clarify that the registration system reform can enhance the market-based pricing mechanism, providing essential insights for China and other countries that have implemented or are about to implement capital market registration system reforms.

Keywords: Registration system; Stock mispricing; Double machine learning; Parallel trends sensitivity test (search for similar items in EconPapers)
JEL-codes: D82 G14 G18 M41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:73:y:2025:i:pb:s0275531924004616

DOI: 10.1016/j.ribaf.2024.102668

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