Stock market development and the global value chain position of manufacturing industry

This paper systematically investigates the relationship between the stock market development and a country’s value chain position of manufacturing industry from a theoretical and empirical perspective. The results show that, first, stock market equity financing has a significant role in promoting the divisional index status and profitability of manufacturing sub-sectors participating in the global value chain. The conclusions remain robust after the transformation of explained variables, considering the effects of endogenous, dynamic panel regression, and staging sample regression. Second, the heterogeneity test shows that investors in the equity market are more inclined to invest in manufacturing industries that are highly R&D-intensive, in a high-level position in the value chain, resource intensive, less reliant on external financing than the average industry level, and with a relatively larger share of tangible assets. Third, the intermediation mechanism test shows that the stock market promotes the manufacturing industry’s position in the global value chain division of labour through the three channels of economies of scale, R&D innovation and efficiency improvement and enhances the profitability of the manufacturing industry in participating in the global value chain through R&D innovation, and cost-saving effects. This leads to policy recommendations to improve the basic system of the stock market and to enhance the quality and efficiency of financial services.