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Does stock market liberalization restrain corporate misconduct: Evidence from research and development manipulation

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  • Zhang, Zhida
  • Ruan, Peiheng
  • Wang, Yuetang

Abstract

This paper investigates the impact of stock market liberalization on corporate research and development (R&D) manipulation, using data from China's A-share listed firms between 2009 and 2023 and leveraging the Mainland–Hong Kong Stock Connect Program as a quasi-natural experiment. The results show that stock market liberalization significantly reduces firms' engagement in R&D manipulation. This mitigating effect appears to stem from reduced agency costs, improved information transparency, and heightened external monitoring. Cross-sectional analyses further reveal that the effect of liberalization varies depending on investor sentiment, analyst coverage, and industry characteristics. Overall, the study provides new insights into how stock market liberalization can help emerging markets address corporate misconduct.

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  • Zhang, Zhida & Ruan, Peiheng & Wang, Yuetang, 2025. "Does stock market liberalization restrain corporate misconduct: Evidence from research and development manipulation," International Review of Financial Analysis, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:finana:v:106:y:2025:i:c:s1057521925006829
    DOI: 10.1016/j.irfa.2025.104595
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