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Does stock market liberalization increase company TFP? Evidence from the Shanghai-Shenzhen-Hong Kong stock connect program in China

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  • Cheng, Zhonghua
  • Zhu, Yeman

Abstract

This paper studies the impact of the liberalization of the Chinese stock market on company total factor productivity (TFP) and its mechanism of action by using the "Shanghai-Hong Kong Stock Connect" program. The benchmark regression results based on the multi-period difference-in-difference (DID) model show that the implementation of the “Shanghai-Hong Kong Stock Connect” program significantly increases the TFP of target companies, a conclusion that is still valid after a series of robustness tests. Further mechanism analyses shows that the program increases company TFP by both increasing a company's stock liquidity and information transparency and reducing the degree of financing constraints.

Suggested Citation

  • Cheng, Zhonghua & Zhu, Yeman, 2024. "Does stock market liberalization increase company TFP? Evidence from the Shanghai-Shenzhen-Hong Kong stock connect program in China," Economic Systems, Elsevier, vol. 48(3).
    • Handle: RePEc:eee:ecosys:v:48:y:2024:i:3:s0939362524000621
    DOI: 10.1016/j.ecosys.2024.101240
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