IDEAS home Printed from https://ideas.repec.org/a/kap/rqfnac/v64y2025i4d10.1007_s11156-024-01350-9.html
   My bibliography  Save this article

The impact of stock market liberalization on corporate diversification: evidence from China

Author

Listed:
  • Hengmiao Bao

    (Xiamen University)

  • Zhiyu Chen

    (Xiamen University)

  • Yushuang Li

    (Jiaxing University)

  • Jiaoliang Jiang

    (South China University of Technology)

Abstract

Exploiting the introduction of the Shanghai-Hong Kong Stock Connect (SHKC) program as a shock to the liberalization of China’s stock market, we employ a difference-in-differences (DiD) model to investigate the effect of stock market liberalization on the level of corporate diversification. Our baseline results show that stock market liberalization is associated with a lower level of corporate diversification. The decline in controlling shareholder tunneling and information asymmetry are two plausible mechanisms through which stock market liberalization diminishes corporate diversification. Further analyses show that the impact of stock market liberalization is more pronounced for firms located in regions with weak law enforcement and for non-state-owned enterprises. Moreover, we rule out alternative explanations that the relaxation of financial constraints and the reduction of agency costs between managers and shareholders discourage firms from pursuing diversification. Overall, this study sheds light on how stock market liberalization shapes corporate business strategy in emerging markets.

Suggested Citation

  • Hengmiao Bao & Zhiyu Chen & Yushuang Li & Jiaoliang Jiang, 2025. "The impact of stock market liberalization on corporate diversification: evidence from China," Review of Quantitative Finance and Accounting, Springer, vol. 64(4), pages 1841-1878, May.
    • Handle: RePEc:kap:rqfnac:v:64:y:2025:i:4:d:10.1007_s11156-024-01350-9
    DOI: 10.1007/s11156-024-01350-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11156-024-01350-9
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11156-024-01350-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Stock market liberalization; Corporate diversification; Tunneling; Information asymmetry;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:rqfnac:v:64:y:2025:i:4:d:10.1007_s11156-024-01350-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.