China Connect and innovation activity

Haijian Chen and Jingwen Yu

Applied Economics Letters, 2024, vol. 31, issue 19, 2067-2070

Abstract: Based on the Shanghai-Hong Kong stock connect and the Shenzhen-Hong Kong stock connect (China Connect), we use the difference-in-differences combined with propensity score matching method to investigate firm’s response in innovation activity to stock market openness. Our findings reveal that the stock market openness has a positive impact on innovation quality. Moreover, the China Connect improves the innovation quality through relaxing financial constraint and improving stock liquidity. Our research shows that the stock market openness plays an important role in shaping the innovation ability of real economy.

Date: 2024
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DOI: 10.1080/13504851.2023.2210808

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