Research On The Impact Of Shanghai-Hong Kong Stock Connect On The Pricing Efficiency Of Family Listed Companies

On November 17,2014,the Shanghai-Hong Kong Stock Connect was officially launched,and the mechanism implemented the Shanghai and Hong Kong stock market interconnection through the Shanghai Stock Connect and the Hong Kong Stock Connect.The Shanghai Stock Connect is an important channel for foreign investors to enter the Shanghai stock market.Whether the entry of foreign investors can promote the stock price of the underlying stocks to more accurately and timely reflect the companies' s characteristics,and to improve the pricing efficiency of the underlying stocks is a problem that has attracted wide attention from scholars since the launch of the Shanghai-Hong Kong Stock Connect.Many scholars have discussed the impact of Shanghai-Hong Kong Stock Connect on the pricing efficiency of the underlying stocks at the level of all the underlying stocks,and have reached a positive conclusion.However,when only considering a class of stocks with relatively low information transparency among the underlying stocks,whether the above conclusion is still true is a topic worthy of further study.This article selects family listed companies as the research object,because the non-market relational transactions within the family,resulting in lower information transparency of family listed companies.This paper further studies the influence of Shanghai Hong Kong stock connect on the pricing efficiency of the underlying stocks from the perspective of the family listed companies,that is to test whether the overseas investors can also improve the pricing efficiency of the family listed companies after the start of Shanghai Hong Kong stock connect? If so,this paper can provide further empirical evidence for the impact of Shanghai Hong Kong stock connect on the pricing efficiency of the underlying stocks.This paper measures the pricing efficiency from two dimensions,one is the degree to which stock prices reflect a company's characteristics(also known as “the information content of stock price”),and the other one is the speed at which stock prices reflect information(also known as “the speed of stock price discovery”).Then we use the propensity matching method(PSM)and difference in difference method(DID)to test whether the pricing efficiency of listed companies in the family has been significantly improved after the Shanghai-Hongkong stock connect's opening.According to the test results,the information content of the family listed companies' s stock price has been significantly improved,but the speed of price discovery has not been significantly improved.Further,this article discusses the path and mechanism of the significant increase in the information content of stock price from the information channel and corporate governance channels.The research results support the information channel,that is,foreign investors have more professional information mining capabilities,which can mine relational transaction behavior information within the family,further enhance the degree of informed transactions,and thus promote the integration of company-level information into stock prices;but The channel of corporate governance has not been supported by empirical evidence,that is,the role of foreign investors in optimizing the governance of listed companies in the family is still limited.It is difficult to restrain the controlling shareholder 's infringement of the interests of listed companies and the false reporting and concealment of information.Therefore,the informed transactions' s trade-off effects of the cost and earnings cannot be increased,and cannot further enhance the level of informed trading and increase the information content of stock price.The research results in this paper affirm the role of Shanghai-Hong Kong Stock Connect in improving the pricing efficiency of listed companies in the family,especially the information content of stock price and find that the increase in it is mainly due to the fact that foreign investors' information mining activities.On the one hand,the work of this paper intuitively provides the pricing efficiency performance of the family listed companies under the Shanghai-Hong Kong Stock Connect,and more importantly,it can provide further test evidence for whether the Shanghai-Hong Kong Stock Connect can improve the underlying stocks' pricing efficiency and how to improve it.