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The dark side of stock market liberalization: Perspectives from corporate R&D activities in China

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  • Jia, Qiaoyu
  • Zhou, Jia'nan

Abstract

This study explores how stock market liberalization impacts corporate research and development (R&D) activities and examines the impact channels. Based on a quasi-natural experiment on the Shanghai-Hong Kong Stock Connect, we report a significantly negative relationship between stock market liberalization and R&D activities in non-state-owned enterprises (non-SOEs) using a difference-in-difference approach. For one thing, a decrease in analyst coverage will reduce the supervision of R&D activities; for another, the alleviation of financing constraints will heighten corporate financialization, resulting in a greater crowding-out effect on R&D activities. Furthermore, R&D activities in SOEs, which are guided by government policies, are not significantly affected by stock market liberalization.

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  • Jia, Qiaoyu & Zhou, Jia'nan, 2021. "The dark side of stock market liberalization: Perspectives from corporate R&D activities in China," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    • Handle: RePEc:eee:ecofin:v:58:y:2021:i:c:s1062940821001182
    DOI: 10.1016/j.najef.2021.101498
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