| It has been a long time since the price difference between dual-listed firms in mainland China and Hong Kong exists,and many scholars agree that the two markets segmentation and capital restrictions will impede arbitrageurs to eliminate this difference,which is the main reason for this price spread.In November 17,2014,the highly anticipated Shanghai-Hong Kong Stock Connect(SHSC)program has been formally implemented.SHSC program allows qualified investors to buy and sell each other's stocks within the scope of the provisions,and stocks of dual-listed companies in Shanghai and Hong Kong are within the scope of the provisions as well.The implementation of the policy has improved the effectiveness of the mainland stock market and further opened the Chinese capital market.Based on the difference-in-difference method and the use of the stock and financial data of dual-listed companies,this paper aims to explore the implementation of the policy of SHSC through the study of the relative CAR and the difference between the two places.Stocks of dual-listed companies in Shanghai and Hong Kong can trade with each other so we call them the treatment group,while Stocks of dual-listed companies in Shenzhen and Hong Kong is treated as a control group because they cannot trade.Through the empirical study,we found that:(1)the policy causes a decrease by 3% in the twin CARs of the treated firms compared to the control companies;(2)because A shares are usually relative to the H shares premium,the increase in price of H-shares on policy launch date decreases the relative twin CARs of treatment group.(3)SHSC policy in the announcement did not exert a significant impact on the effect of the price of the stocks concerned,so it is the capital flow that causes the convergence of the twin prices of dual-listed companies. |
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