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Impact of capital market internationalization on stock markets: Evidence from the inclusion of China A-shares in the MSCI Emerging Markets Index

Author

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  • Dong, Shizheng
  • Zheng, Jianming
  • Jia, Haoyang
  • Zhang, Zili

Abstract

This paper assesses the short- and long-term market reaction to including A-shares in the Morgan Stanley Capital International Emerging Markets Index. In the short term, the underlying stocks gain cumulative excess returns before and after the announcement date, reflecting a positive signal to the market and presenting a significant index effect. In the long run, including A-shares in the index may improve market quality by influencing stock market synchronization and liquidity and turnover rate. Therefore, we suggest that emerging market countries should actively internationalize their capital markets, introduce foreign investors, increase investor awareness, and improve their capital market structures.

Suggested Citation

  • Dong, Shizheng & Zheng, Jianming & Jia, Haoyang & Zhang, Zili, 2023. "Impact of capital market internationalization on stock markets: Evidence from the inclusion of China A-shares in the MSCI Emerging Markets Index," Research in International Business and Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001150
    DOI: 10.1016/j.ribaf.2023.101989
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    References listed on IDEAS

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    Cited by:

    1. Wei, Zhihua & Wu, Deqian & Zeng, Aimin & Li, Bo, 2024. "Spillover effects of MSCI inclusion announcement: Evidence and implications from China," Pacific-Basin Finance Journal, Elsevier, vol. 88(C).
    2. Liu, Yingyuan & Chen, Wenhui & He, Xinyu, 2025. "Substantive innovation or strategic catering: Capital market pressure and corporate green innovation structure," International Review of Economics & Finance, Elsevier, vol. 97(C).
    3. Li, Ping & Wang, Kai & Zhang, Junping, 2023. "Does the inclusion of Chinese A-shares in the MSCI EM index promote ESG performance?," Finance Research Letters, Elsevier, vol. 58(PB).
    4. Min, Shiyao & Dai, Bin & Wu, Qiqi, 2026. "When global standards meet local firms: Capital market internationalization and the decline of R&D manipulation," Research in International Business and Finance, Elsevier, vol. 81(C).
    5. Tan, Yafei & Zhu, Zhaohui, 2024. "The internationalization of capital market and corporate innovation capabilities: A quasi-natural experiment on the inclusion of China's A-shares in the MSCI index," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 1021-1038.
    6. Jin, Tianquan & Wang, Jinhai & Wu, Yingying, 2026. "Does firms’ rhetorical nationalism obscure stock price informativeness? Evidence from Chinese listed firms," Research in International Business and Finance, Elsevier, vol. 81(C).
    7. Cheng, Zhengtao & Ding, Yong & Xiong, Ding, 2025. "Promoting efficiency through openness: Internationalization of capital markets and enterprises’ overseas investment efficiency," Finance Research Letters, Elsevier, vol. 85(PB).
    8. Tian, Lulu & Song, Xinyang & Du, Meng & Xu, Baochang, 2025. "The disciplinary impact of capital market internationalization on corporate ESG greenwashing: A study of A-shares' inclusion in the MSCI index," International Review of Financial Analysis, Elsevier, vol. 103(C).

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