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Capital market liberalization, internal control and corporate diversification: Evidence from China

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  • Li, Zhongze
  • Chen, Qinyuan
  • Zhang, Yi

Abstract

Using a sample of Chinese listed firms, we examine the effect of capital market liberalization on corporate diversification in the host country. Our findings show that after the opening of the capital market, corporate diversification significantly reduces. Moreover, we show that improving the quality of internal control is an important mechanism for capital market liberalization to reduce corporate diversification. Heterogeneity tests show that the effect of capital market liberalization on corporate diversification is more significant in firms with dual CEOs and low board diligence. Overall, capital market liberalization enhances the corporate governance of firms in a host country.

Suggested Citation

  • Li, Zhongze & Chen, Qinyuan & Zhang, Yi, 2025. "Capital market liberalization, internal control and corporate diversification: Evidence from China," Finance Research Letters, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014673
    DOI: 10.1016/j.frl.2024.106438
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    References listed on IDEAS

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    More about this item

    Keywords

    Capital market liberalization; Internal control; Corporate diversification;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • F15 - International Economics - - Trade - - - Economic Integration

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