The Research On The Impact Of China’s Capital Market Opening On Equity Financing Cost

The Shanghai-Hong Kong Stock Connect officially launched on November 17,2014.For the first time,investors’ funds are allowed to flow freely between the tw;o capital markets.The purpose of us is analyze the impact of Shanghai-Hong Kong Stock Connect on the economic benefits of China’s capital market and supplement the research on the influencing factors of the cost of equity financing.We further elaborate the relationship between Shanghai-Hong Kong Stock Connect and the opening of the capital market by explaining the historical evolution of China’s capital market opening.Based on the quasi-natural experimental platform of Shanghai-Hong Kong Stock Connect,we constructs a difference-in-differences model(DID)to analyze the impact of Shanghai-Hong Kong Stock Connect on equity financing costs by using the data of China A-share listed companies.The results show that the opening of Shanghai-Hong Kong Stock Connect can significantly reduce the cost of equity financing.We used the variable substitution method and the firm-fixed-effects model to test the robustness,which further proves the reliability of the result.We analyzes the differences in the impact of Shanghai-Hong Kong Stock Connect on equity financing costs under different levels of corporate governance and different corporate property rights.We found that Shanghai-Hong Kong Stock Connect has a greater impact reduction in the equity financing of companies with higher concentration of ownership or lower separation of ownership and business or lower investment efficiency.Compared with non-state-owned enterprises,state-owned enterprises can reduce the cost of equity financing more effectively after the opening of Shanghai-Hong Kong Stock Connect.Based on this conclusion,we put forvard relevant policy recommendations at the micro level and macro level.At the macro level,we should further improve the Shanghai-Hong Kong Stock Connect system and relax the control of sell short or bear.We should gradually liberalize the Shanghai-Hong Kong Stock Connect quota,and expand the scale of foreign capital inflows.We should reduce the transaction costs of Shanghai-Hong Kong Stock Connect.At the micro level,we should improve the level of corporate governance,regulate the information disclosure process,optimize the investor structure,and increase the number of institutional investors.