Impact of Recent Chinese Stock Market Liberalization: History and Literature Review

Abstract

Synopsis The research problem In recent decades, the Chinese government has taken several measures to liberalize its stock market to attract foreign investment. In this survey, we described these liberalization measures and reviewed the research on their consequences. Motivation Along with the rapid development of the Chinese stock market, increasing numbers of global investors have shown interest in this market. As a result, we also witness a steady growth in the number of empirical research and review studies published in the international journals. However, no published reviews have focused on stock market liberalization, which is an important perspective requiring further investigation. Our study bridges the gap by making a thorough and in-depth review on issues associated with the stock market liberalization in China. The discussed questions and implications In analyzing this literature, we focused on two dimensions: (1) how liberalization impacts five corporate-level accounting and financial issues—corporate governance, information environment and financial disclosure, earnings quality, value-relevance of accounting information, and auditing, and (2) how liberalization improves the Chinese stock market as a whole and affects asset pricing in this market. Based on the issues explored in the literature, we provide suggestions for future research in our concluding remarks.