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When global standards meet local firms: Capital market internationalization and the decline of R&D manipulation

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  • Min, Shiyao
  • Dai, Bin
  • Wu, Qiqi

Abstract

The construction of capital market systems is a key path to enhancing market functions; however, there is no consensus on the actual effects of their international development. This study employs Chinese A-share listed companies from 2010 to 2023 as a sample. Leveraging the quasi-natural experiment of A-shares' inclusion in the MSCI index, we construct a difference-in-differences model to empirically examine the impact of capital market internationalization on corporate R&D manipulation. The results demonstrate that capital market internationalization significantly inhibits corporate R&D manipulation, a finding that remains robust to a battery of robustness tests. Further mechanism analysis reveals that this international governance effect operates primarily through three channels: alleviating managerial myopia, reducing financing constraints, and improving internal control quality. The effect is more pronounced in non-state-owned enterprises, firms without directors' and officers' liability insurance, those with higher media attention, those with stronger market competitive positions, and non-high-tech enterprises. Economic consequence tests indicate that the MSCI inclusion enhances corporate resilience by curbing R&D manipulation and promotes a more positive tone in management disclosures. This study suggests that capital market internationalization, by exerting institutional isomorphism pressure, prompts enterprises to shift from strategic innovation arbitrage to substantive innovation activities. Our findings not only challenge the conventional wisdom that 'innovation incentives inevitably improve innovation quality' but also provide a novel theoretical lens for understanding the divergence between innovation quantity and quality in emerging markets.

Suggested Citation

  • 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).
    • Handle: RePEc:eee:riibaf:v:81:y:2026:i:c:s0275531925004398
    DOI: 10.1016/j.ribaf.2025.103183
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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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