Abstract
Shanghai-Hong Kong Stock Connect Program began on July 17th, 2014, aiming to strengthen the cooperation in capital markets and promote the opening of domestic companies to the outside world. Based on DID and PSM-DID method, the article analyzes data sample from 2010 to 2017, exploring the effects of the program on financing constraints. It shows that Shanghai-Hongkong Stock Connect Program alleviates financing constraints of underlying companies: If the institutional ownership is regarded as moderating variable, the financing constraints changes significantly; With the help of this program, enterprises with high investors attention and low tax rate are more likely to get rid of the dilemma of financing. According to the results, the government should keep promoting the development of capital markets and enterprises should learn from the outside world and constantly improve their management skills.
Highlights
President Xi delivered important speeches in the Central Economic Working Conference, held in Beijing from December 8th to 10th in 2021
The explained variable SA is financing constraints; the core explanatory variable Treat*Post represents net effect of Shanghai-Hong Kong Stock Connect Program; X stands for a series of control variables; Ind denotes industry fixed effect; Year represents annual fixed effect; ε is a random disturbance term. β1 is the coefficient we focus on: being positive indicating that the program relieves financing constraints; otherwise, the program worsens financing constraints
It can be seen that the both coefficients of Post*Treat are significantly positive, indicating that the program significantly relieves financing constraint, which verifies the hypothesis H1b
Summary
President Xi delivered important speeches in the Central Economic Working Conference, held in Beijing from December 8th to 10th in 2021. Shi Qian & Yao Qiuge (2018) took the KZ index as a measure of financing constraints and analyzed the impact of the launch of the program on variables such as analyst tracking and audit quality They believed that the mechanism could reduce information asymmetry, alleviate agency problems, improve enterprise management and reduce the risk of financing constraints; Yang Shenggang et al(2020) found that the program reduced the financing constraints a lot especially on private enterprises, non-multinational enterprises and samples with high local judicial efficiency and marketization level; Zhou Fan(2016) proved that Shanghai-Hong Kong Stock Connect Program could encourage those enterprises to volunteer to disclose information, which would reduce financing constraints. SA indicator is used as measurement of the degree of financing constraints, for the purpose of relieving endogeneity problem
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