The Evaluation Of Capital Market Quality Of ShanXi Province

In2010Shanxi Province became a national experimental area from being resource-based type into comprehensive economic transformation type, which indeed brought great opportunities for development. In this context, it is meaningful to study the quality of the capital market in Shanxi, in order to help local government fully understand the operation status and get knowledgeable with the importance to develop the local capital market.Since2006, the Shanghai Stock Exchange has released Report of quality of listed companies in Shanghai Stock Exchange for six years. In this report, not only market quality of different industries and sectors, but also that of all listed companies in the Shanghai Stock Exchange is analyzed. All of these serve as a good source in doing research in terms of market operation. As an important part of the capital market, the listed companies as a regional capital market important constituent, the overall quality of the regional capital market conditions can’t simply reflected using the results, which is calculated from high frequency points and points transaction data. However, to some extent, the strengths and weaknesses will nevertheless be reflected.Foreign and domestic academics have done researches to select quality evaluation index. However, no sound conclusion was made. As far as there exist no comprehensive indices to evaluate the market completely, the indices mentioned in Report of quality of listed companies in Shanghai Stock Exchange will be applied with introduction of factor analysis into building up a comprehensive indices system. Listed companies on Shanghai Stock Exchange will be chosen as the samples. The above comprehensive indices are compromised of market liquidity, volatility, effectiveness and so on. Meanwhile, the status of capital market in Shanxi province all over China will also be evaluated. Advice to increase the quality of Shanxi capital market will be raised after analyzing the reasons hereof. The full use will be thereafter made of by the decision-makers in promoting the economic transformation of Shanxi’development.The research results show that liquidity is the most important part of market quality, then goes the volatility. Among them, the market liquidity flow is classified into capacity factor and transaction cost factor. Both of these are significantly weighted in comprehensive indices, being on the priority to consider the quality of market. Shanxi Province, with the lowest transaction cost among all the provinces, has good liquidity. Therefore, Shanxi Province takes the second place in terms of market quality.With the advantages of lower transaction costs, which results in lower financing cost, will help to increase the corporate value of the listed companies in Shanxi Province. As a consequence, the local government will benefit from the tax collection. To add, the improved liquidity will help to reduce the risks exposed to all kinds of investors.