An Empirical Study of Shanghai-Hong Kong Stock Connect Program and Financing Constraints under the Regulatory Effects

Abstract

Shanghai-Hong Kong Stock Connect Program began on July 17th, 2014, aiming to strengthen the cooperation in capital markets and promote the opening of domestic companies to the outside world. Based on DID and PSM-DID method, the article analyzes data sample from 2010 to 2017, exploring the effects of the program on financing constraints. It shows that Shanghai-Hongkong Stock Connect Program alleviates financing constraints of underlying companies: If the institutional ownership is regarded as moderating variable, the financing constraints changes significantly; With the help of this program, enterprises with high investors attention and low tax rate are more likely to get rid of the dilemma of financing. According to the results, the government should keep promoting the development of capital markets and enterprises should learn from the outside world and constantly improve their management skills.