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Research on the influence of capital market liberalization on the ESG performance of listed companies—A quasinatural experiment based on the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connects

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  • Huang, Rui
  • Duan, Kunyue

Abstract

The Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect trading systems, which reflect important innovative policies of China’s capital market reform, have attracted significant attention from both academia and practice concerning their economic consequences. The influence of the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect systems on listed companies’ ESG performance is empirically examined by constructing a difference-in-differences model and selecting data on A-share listed companies from 2009 to 2021. It is found that the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect systems significantly promote the ESG performance of listed companies, and this conclusion holds after robustness testing. This promoting effect is more pronounced in state-owned companies, and the external legal environment is an important safeguard for the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect systems to drive improvements in listed companies’ ESG performance. An analysis of the continuity of capital market liberalization shows that the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect systems have expanded the breadth and depth of capital market liberalization following the QFII system, making the dividends from improved ESG performance more prominent. An analysis of the economic consequences shows that the liberalization of the capital market ultimately enhances corporate value by improving listed companies’ ESG performance. Based on these findings, policy recommendations are proposed for different stakeholders to promote the practical application of ESG, advocate green investment concepts, and promote high-quality, sustainable development in China’s economy.

Suggested Citation

  • Huang, Rui & Duan, Kunyue, 2024. "Research on the influence of capital market liberalization on the ESG performance of listed companies—A quasinatural experiment based on the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connects," Pacific-Basin Finance Journal, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:pacfin:v:83:y:2024:i:c:s0927538x23002925
    DOI: 10.1016/j.pacfin.2023.102221
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    Citations

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    Cited by:

    1. Jiang, Haohan & Zhao, Fang, 2025. "Impact of digital finance on the high-quality development with Chinese cultural industry," Finance Research Letters, Elsevier, vol. 80(C).
    2. Si, Deng-Kui & Meng, Mingyue & Wang, Jiaming & Zhou, Fuyou, 2024. "Does capital market liberalization increase corporate labor income share? Evidence from China," Economic Modelling, Elsevier, vol. 141(C).
    3. Sun, Zhennan & Du, Qunyang & Du, Anna Min & Li, Zhongyuan & Yang, Tianle, 2024. "The information environment and ecological environment perspectives: Capital market openness and firm ESG rating divergence," Research in International Business and Finance, Elsevier, vol. 71(C).
    4. Ruan, Lei & Li, Jianing & Huang, Siqi, 2024. "News or noise? ESG disclosure and stock price synchronicity," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    5. Gan, Zhongxin & Yusupov, Nurmukhammad, 2025. "Supply chain ESG and green innovation at midstream firms: An integrated approach with both supplier and buyer sides," Research in International Business and Finance, Elsevier, vol. 78(C).
    6. Gao, Haiyan, 2025. "The impact of digital economy development on the performance of digital creative enterprises," Finance Research Letters, Elsevier, vol. 84(C).
    7. Xu, Morong & Wang, Yaopeng, 2025. "Beyond the green facade: Evidence of a nonlinear link between greenwashing and financing efficiency," Global Finance Journal, Elsevier, vol. 68(C).
    8. Yang, Xiangyang & Wang, Cong & Liu, Bei, 2025. "ESG performance and corporate labor investment efficiency: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 98(C).
    9. Li, Zhe & Zhi, Chuyu & Li, Qinghai & Qin, Hua, 2025. "The impact of the digital divide on household wealth accumulation," Finance Research Letters, Elsevier, vol. 85(PB).
    10. Zijian Cheng & He Gao & Zhangxin ( Frank) Liu & Sirimon Treepongkaruna, 2024. "Strategic choices in going public: ESG performance implications in China," Business Strategy and the Environment, Wiley Blackwell, vol. 33(8), pages 7708-7728, December.
    11. Zeyuan Huang & Yi Si & Gaoliang Tian & Chongwu Xia & Lei Zhang, 2024. "Learning ESG from stock prices: Evidence from a quasi‐natural experiment in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(5), pages 4619-4646, December.
    12. Zhao, Yuanshuang & Dong, Liang & Sun, Yuhang & Ma, Yunning & Zhang, Ning, 2024. "Is air pollution the original sin of firms? The impact of air pollution on firms' ESG scores," Energy Economics, Elsevier, vol. 136(C).

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