Capital Market Opening,Information Environment And Firm Innovation

In recent years,China’s economy is changing from a phase of high-speed growth to a phase of high-quality development,and innovation is gradually becoming the most important source of driving sustainable economic growth.However,unlike conventional operating and investing activities,innovation activities of enterprises are characterized by high failure rate,long payback period,insufficient decision-making information and difficulty in identifying the value of innovation,etc.The whole innovation process is independent of the strong support from the financial system,especially the capital market.China’s capital market has gone through several upgrading iterations,and both the breadth and depth of capital market opening have been deepened.As the most representative systems in the process of capital market opening,the Shanghai and Shenzhen-Hong Kong Stock Connections have had an important impact on the investor structure and market efficiency of China’s capital market,and have gradually affected the economic behavior of micro enterprises.At present,both the Shanghai and Shenzhen-Hong Kong Stock Connect systems have been operating for a significant period of time,and are of high research value and full research conditions.Based on the above background,this paper tries to investigate the direction and mechanism of the impact of the capital market opening policy represented by the Land-Hong Kong Stock Connect system on the innovation level of enterprises.This paper reviewed the current status of research on the economic consequences of capital market liberalization and the influencing factors of enterprise innovation,and proposed "information environment" as the focus of this study on the basis of the review of existing literature.Combining the characteristics of enterprise innovation,the Land-Hong Kong Stock Connect system and existing research findings,this paper proposed a research hypothesis on the direction and mechanism of the impact of the Land-Hong Kong Stock Connect system on the level of enterprise innovations.This paper conducted an empirical study on the implementation of the Land-Hong Kong Stock Connect system as a quasi-natural experiment of capital market liberalization.First,based on unbalanced panel data of Chinese A-share listed companies from 2010—2021,we estimated the changes in the innovation level of the underlying companies before and after the policy implementation using a multi-temporal double difference approach.Second,robustness tests were conducted using a variety of approaches such as PSM-DID,replacement of explanatory variables,replacement of regression methods,placebo tests,and exclusion of other policy confounding.Third,we further explored the mechanism of the effect of the Land-Hong Kong Stock Exchange trading system on firm innovations by introducing interaction terms and by grouping tests.Finally,we investigated the impact of the Land-Hong Kong Stock Connect trading system on firm value and the differences in the impact on innovations of the underlying firms with different levels of trading activities and different foreign shareholdings.This paper concluded the following findings:(1)the Land-Hong Kong Stock Exchange trading system has significantly contributed to the number of invention patent applications,non-invention patent applications and the total number of patent applications of the subject companies;(2)the implementation of the Land-Hong Kong Stock Exchange trading system has improved the information environment and enhanced corporate innovation through three major ways:alleviating financing constraints,exerting information governance and managerial information learning;(3)the implementation of the Land-Hong Kong Stock Exchange trading system has improved the corporate innovation level;(3)The Land-Hong Kong Stock Exchange trading system has a more significant promotion effect on the innovation level of companies with non-cross-listed and low QFII shareholding before the implementation of the system and those with high trading activity through the Land-Hong Kong Stock Exchange channel after the implementation of the system;(4)The Land-Hong Kong Stock Exchange trading system has promoted the evaluation of enterprise innovation value by the market,so that the current patent application can create more value for enterprises.Finally,based on the above findings,this paper has put forward relevant suggestions to the government and listed companies.This paper not only enriches the research on the economic consequences of capital market opening,but also clarifies the mechanism of capital market influencing enterprise innovation from the perspective of information environment,which has profound significance for promoting the transformation of economic development mode and high level of capital market opening to the outside world,regulating the operation of China’s capital market,and helping enterprises to improve their innovative ability.