The effect of overseas investors on local market efficiency:evidence from the Shanghai/Shenzhen–Hong Kong Stock Connect

Using a recent stock market liberalization reform policy in China—the Stock Connect—as a quasi-natural experiment,this study examines the effect of stock market liberalization on market efficiency.Employing a dataset of 17,086 Chinese listed firms covering 2009 to 2018,we find that stock market liberalization improves the market efficiency of the Chinese mainland stock market.We further explore the potential channels through which the Stock Connect can enhance the efficiency of the A-share(A-shares refer to shares issued by Chinese companies incorporated in China's Mainland,traded in the Shanghai Stock Exchange and the Shenzhen Stock Exchange.They are denominated in Chinese RMB(the local currency).A-shares were restricted to local Chinese investors before 2003,are open to foreign investors via the Qualified Foreign Institutional Investor,RMB Qualified Foreign Institutional Investor,or the Stock Connect programs.)market.The findings show that liberalizing capital markets could benefit local market efficiency by increasing stock price informational efficiency and improving corporate governance quality.The additional analysis shows that stock market liberalization has a significant and positive impact on local market efficiency,enhancing firm value and reducing stock crash risk.We conduct various robustness checks to corroborate our findings.This study provides important policy implications for emerging countries liberalizing capital markets for foreign investors.

Production response to price risk and market liberalization of Nigerian major agricultural crops

This study models supply response for major agricultural crops in Nigeria which include the standard arguments and price risk. The data comes from Central Bank of Nigeria annual reports and statement of account, National Bureau of Statistics＇ abstract of statistics and annual Agricultural survey manual. The data are analyzed using autoregressive distributed lag and cointegration and error correction models. The results indicate that producers are responsive not only to price but also to price risk and exchange rate.

Stock market liberalization and financial reporting quality

This study employs the Mainland-Hong Kong Stock Connect pilot program in China to investigate the influence of stock market liberalization on firm-level financial reporting quality(FRQ).First,through a staggered difference-indifference specification strategy,we find that eligible firms experience a significant improvement in FRQ,as measured by a composite proxy of accrual earnings management,real activities manipulation,and financial report restatement.Second,cross-sectional analyses suggest that the effect is stronger when firms are headquartered in regions with weaker institutional environments,characterized by lower judicial efficiency and less developed financial markets.We also show that the impact is more pronounced when firms face less external pressure and possess more effective corporate governance before stock market liberalization.Third,further evidence highlights that augmented FRQ is associated with a reduction in regulatory compliance costs,an improvement in stock price efficiency,and a mitigation of financing constraints.Collectively,we shed new light on the role of stock market liberalization in shaping firms’financial reporting behavior.