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Is the Stock Market Just a Side Show? Evidence from a Structural Reform

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  • Murillo Campello
  • Rafael Perez Ribas
  • Yan Wang

Abstract

The 2005 split-share reform in China mandated the conversion of nontradable stocks into tradable status. This paper examines the effects of stock markets on corporate outcomes exploiting multiple institutional features of the Chinese conversion program. Using a generalized propensity score matching approach, we identify increases in corporate profitability, investment, value, and productivity as a result of the reform. We also identify changes in firms' likelihood to issue shares and engage in mergers, as well as changes in dividend and capital structure policies. Our findings provide insights on the role of stock markets in shaping corporate activity and on the impact of regulation on economic growth.

Suggested Citation

  • Murillo Campello & Rafael Perez Ribas & Yan Wang, 2014. "Is the Stock Market Just a Side Show? Evidence from a Structural Reform," NBER Working Papers 20121, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20121
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    Cited by:

    1. repec:spr:reaccs:v:22:y:2017:i:2:d:10.1007_s11142-017-9394-2 is not listed on IDEAS
    2. Bing Xu, 2017. "Permissible collateral and access to finance: evidence from a quasi-natural experiment," Working Papers 1750, Banco de España;Working Papers Homepage.
    3. Stephen J. Terry, 2015. "The Macro Impact of Short-Termism," Discussion Papers 15-022, Stanford Institute for Economic Policy Research.
    4. Liang Guo & Ya Dai & Donald Lien, 2016. "The effects of China’s split-share reform on firms’ capital structure choice," Applied Economics, Taylor & Francis Journals, vol. 48(27), pages 2530-2549, June.
    5. repec:bla:ausecp:v:57:y:2018:i:3:p:284-308 is not listed on IDEAS
    6. repec:eee:chieco:v:54:y:2019:i:c:p:237-255 is not listed on IDEAS
    7. Ma, Ming & Sun, Xian & Waisman, Maya & Zhu, Yun, 2016. "State ownership and market liberalization: Evidence from China's domestic M&A market," Journal of International Money and Finance, Elsevier, vol. 69(C), pages 205-223.
    8. Xiao, Gang, 2015. "Trading and earnings management: Evidence from China's non-tradable share reform," Journal of Corporate Finance, Elsevier, vol. 31(C), pages 67-90.
    9. repec:eee:jbfina:v:85:y:2017:i:c:p:83-98 is not listed on IDEAS
    10. Liu, Qigui & Tian, Gary, 2012. "Controlling shareholder, expropriations and firm's leverage decision: Evidence from Chinese Non-tradable share reform," Journal of Corporate Finance, Elsevier, vol. 18(4), pages 782-803.

    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • F30 - International Economics - - International Finance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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