Journal article
Does stock market liberalization improve stock price efficiency? Evidence from China
Yunsen Chen, Jianqiao Huang, Xiao Li, Qingbo Yuan
Journal of Business Finance and Accounting | Wiley | Published : 2022
DOI: 10.1111/jbfa.12586
Abstract
In this study, we examine whether liberalization of the stock market improves stock price efficiency using China's market liberalization pilot program as a shock. We find that investible firms exhibit a significant increase in price efficiency, as proxied by stock price non-synchronicity, after stock market liberalization. The results are robust to a series of tests and remain unchanged after we address the issue of endogeneity. We identify two channels through which price efficiency can be improved: better disclosure by firms and the incorporation of more information into stock prices through the trading activities of foreign investors. We also find that investment becomes more sensitive to..
View full abstractGrants
Awarded by National Natural Science Foundation of China
Awarded by Natural Science Foundation of Zhejiang Province
Funding Acknowledgements
We greatly appreciate helpful comments and suggestions from Qi Chen (editor), an anonymous referee, Mary Barth, Gary Biddle, Xingqiang Du, Ningzhong Li, Guanmin Liao, Mark Ma, Xiaohui Qu, Xiaofeng Quan, Xuan Tian, Baolian Wang and seminar participants at Central University of Finance and Economics, University of Melbourne, Xiamen University, Harbin Institute of Technology (Shenzhen), Nanjing Auditing University and Soochow University. Yunsen Chen acknowledges financial support from the National Natural Science Foundation of China (#71872198); Jianqiao Huang acknowledges financial supports from the NationalNatural Science Foundation ofChina (#72002189) andNatural Science Foundation of Zhejiang Province (#LQ21G020008); Xiao Li acknowledges financial supports from the National Natural Science Foundation of China (#71802205) and Program for Innovation Research in Central University of Finance and Economics. All errors are ours.