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How does the stock market react to financial innovation regulations?

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  • Yang, Minhua
  • He, Yu

Abstract

This study examines the market reactions of Chinese stock markets to 28 announcements of financial innovation regulations in the period of 2008–2015. Using a well-established event study methodology, we observe average positive market reactions to regulations, thus implying positive impacts of regulations on firm operations. We refer to such an impact as an ‘innovation effect’. Such an effect inversely relates to managerial characteristics (managerial financial connections and political connections). Managerial characteristics have worse influences on market reactions for Non-State-Owned Enterprises (Non-SOEs) than for SOEs. Our results are robust to diverse fixed-effects and potential endogeneity issues.

Suggested Citation

  • Yang, Minhua & He, Yu, 2019. "How does the stock market react to financial innovation regulations?," Finance Research Letters, Elsevier, vol. 30(C), pages 259-265.
    • Handle: RePEc:eee:finlet:v:30:y:2019:i:c:p:259-265
    DOI: 10.1016/j.frl.2018.10.006
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    6. Chindasombatcharoen, Pongsapak & Chatjuthamard, Pattanaporn & Jiraporn, Pornsit & Treepongkaruna, Sirimon, 2023. "Director age and corporate innovation: Evidence from textual analysis," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
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    8. An, Hui & Yang, Ruibo & Ma, Xuejiao & Zhang, Siqi & Islam, Sardar M.N., 2021. "An evolutionary game theory model for the inter-relationships between financial regulation and financial innovation," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    9. Oncu, Erdem, 2021. "The impact of COVID-19 on health sector stock returns," MPRA Paper 111032, University Library of Munich, Germany.
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    More about this item

    Keywords

    Financial innovation regulation; Innovation impact; Managerial characteristics; JEL classification: G14; G18; G34;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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