China's Second Board Market Development Impact On Regional Economic Growth Difference

This paper studies on the effect of China Second Board Market on the economic growth difference between regions, and comes to a conclusion that the Second Board Market draws the difference smaller. In the end, this paper put forward two suggestions on how to make the difference be smaller.Firstly, this paper looks into the development of China Second Board Market, which is obvious in two aspects, one of which is the board’s rapid development; the other is the distribution unbalance of listed companies. The board is set up in Jun.2004, when there are only ten listed companies and the capitalization is16.5billion Yuan, now these numbers become936and4,000billion for a change. Meanwhile the listed companies are distributed unbalanced in two ways, which are in industries and in regions. During the same time period, another phenomenon happens too that the difference turns to be smaller after year2006. Are there some relationship between the development of the Second Board Market and the difference change? The correlation reveals that they are related negatively. This paper studies on this relationship theoretically and empirically.Before this research, one question should be tested whether the Second Board Market affects the economic growth in the first place. With the analysis method of SLR(2010), this paper finds out that the Second Board can prompt the economy by affecting the innovation activities. Meanwhile the Second Board can prompt the production by making the capital distribution more efficiently, may even change the long economic growth equilibrium. This paper proves these conclusions with empirical model.Since the precondition that the Second Board Market would prompt economy is proved, then this paper begins studying the core question that whether the market changes the difference between regions. It is believed that the capital distribution would change in a better way due to the solution in some degree to the asymmetry information problem, which comes from the positive impact of the Second Board Market. The empirical model proves this analysis. And the panel model finds out that the Second Board Market has greater positive influence on the growth of the developing regions than the developed regions. In the rest part, this paper researches why this would happen.In Chapter four, this paper discuss why the Second Board Market would prompt the developing regions more than the developed regions in the aspect of the small and medium-sized enterprises (hereafter SME for short) difference between regions. By data analysis, this paper finds that there is SME difference between regions, which is getting smaller. But how does the SME difference would explain that the Second Board Market can make the economic growth smaller? In fact, the Second Board Market distributes the resource according to the development level of SME instead of GDP per capita, thus when the SME difference divided by the GDP per capita difference is lower than some critical value, the Second Board Market would distribute more resource to developing regions and prompt the economic growth of these regions more, the result of which is the economic growth difference between regions getting smaller. It is proved by empirical model. In the last part of this chapter, one mechanism from the Second Board Market development to the economic growth difference between regions is believed existing that the market affects SME in developing regions more than in developed regions, which reduces the SME development difference. If all the other conditions are not changing during this time, the SME development difference descending can induce a smaller growth difference between regions, which is proved to be right by Granger no-casualty test.Chapter five and Chapter six repeat all the analysis steps but in the aspects of industry structure difference and finance level difference between regions respectively instead of SME development difference between regions. In the place, this paper depicts the fact of difference between regions in industry structure and finance level, and then proves that there is critical value theoretically. Only when the difference is smaller than the critical value, the Second Board Market could reduce the growth difference. In the later part, this paper tests the analysis with ARDL model and proves it to be right. In the last of these chapters, this paper discusses the mechanisms of Second Board Market reducing the growth difference between regions in the aspects of industry structure upgrading and shifting as well as financing respectively.In the end, this paper puts forward two piece of advice to reduce the growth difference between regions, one of which is to promote the development of China Second Board Market, the other is to help developing regions to lessen the difference in economic structure.