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Is the Stock Market Just a Side Show? Evidence from a Structural Reform

Murillo Campello, Rafael Ribas and Yan Wang

No 20121, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The 2005 split-share reform in China mandated the conversion of nontradable stocks into tradable status. This paper examines the effects of stock markets on corporate outcomes exploiting multiple institutional features of the Chinese conversion program. Using a generalized propensity score matching approach, we identify increases in corporate profitability, investment, value, and productivity as a result of the reform. We also identify changes in firms' likelihood to issue shares and engage in mergers, as well as changes in dividend and capital structure policies. Our findings provide insights on the role of stock markets in shaping corporate activity and on the impact of regulation on economic growth.

JEL-codes: C21 D22 F30 G31 O16 (search for similar items in EconPapers)
Date: 2014-05
New Economics Papers: this item is included in nep-cna and nep-tra
Note: CF DEV
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Published as Murillo Campello & Rafael P. Ribas & Albert Y. Wang, 2014. "Is the Stock Market Just a Side Show? Evidence from a Structural Reform," Review of Corporate Finance Studies, Oxford University Press, vol. 3(1-2), pages 1-38.

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