Impact Of Capital Market Opening On Corporate Governance ——Evidence From Shanghai-Hong Kong Stock Connect

The report of the 19th National Congress of the CPC shows that openness brings progress,while closure will lag behind.China’s open doors will not be closed,but will only be opened wider and wider.In recent years,the door of China’s capital market is gradually opening.Capital market opening is an important part of China’s reform and opening up.China’s capital market opening has experienced decades of development,from B shares,H shares and QFII to Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect.The scope of capital market opening-up in China has gradually expanded and deepened.In November 2014,the CSRC officially launched the Shanghai-Hong Kong Stock Connect.There are some research on the impacts of the opening of Shanghai-Hong Kong Stock Connect on listed companies,such as the stock pricing efficiency and investment and financing（Zhong et al.,2018;Zhong and Lu,2018;Chen et al.,2019;Lian et al.,2019）,but few scholars directly studied the impact of Shanghai-Hong Kong Stock Connect on the corporate governance of listed companies.The corporate governance of listed companies is an important topic in the field of corporate finance.Improving the corporate governance of listed companies is an important guarantee to improve the quality of listed companies（Shleifer and Vishny,1997;Becht et al.,2003;Li et al.,2019;Jiang and Kim,2020）.The Fourth Plenary Session of the 19 th Central Committee requires that the modern state-owned enterprise system with Chinese characteristics should be built and the corporate governance modernization of state-owned enterprises should be promoted.Now there are some problems in China’s corporate governance: The market has a serious information asymmetry;The rights and interests of investors are not fully protected;The market is difficult to form a long-term value investment.The ShanghaiHong Kong Stock Connect as an important element in the opening up of China’s capital market to the outside world,what impact will Shanghai-Hong Kong Stock Connect have on the corporate governance of listed companies in China and how will it work?These are important and interesting topics.This paper examines the impact of capital market liberalization on corporate governance and investigates the mechanism of its effect in the context of the policy implementation of Shanghai-Hong Kong Stock Connect.In this paper,the methods include Propensity Score Matching and Differences-in-Differences.The samples include Chinese A shares listed companies from 2011 to 2016.The paper mainly includes the following four conclusions:（1）The corporate governance of listed companies has improved on the whole after the opening of Shanghai-Hong Kong Stock Connect.The heterogeneity test shows that the effect of Shanghai-Hong Kong Stock Connect on corporate governance is more significant among non-state-owned enterprises,and companies that are not cross-listed.（2）The opening of Shanghai-Hong Kong Stock Connect effectively alleviates the type I agency problem of listed companies,and the average salary of the management has decreased significantly.The heterogeneity test shows that the decline in average management salary is more significant for non-state-owned enterprises after the opening of Shanghai-Hong Kong Stock Connect.（3）The opening of Shanghai Hong Kong Stock Connect effectively alleviates the type II agency problem of listed companies,and the equity balance of the company has been significantly improved.Heterogeneity tests show that the equity balance of stateowned enterprises and companies that are not cross-listed increased more significantly after the opening of Shanghai-Hong Kong Stock Connect.（4）The opening of Shanghai Hong Kong Stock Connect has effectively improved the quality of accounting information of listed companies.The heterogeneity test shows that the Shanghai-Hong Kong Stock Connect has a more significant effect on improving the quality of accounting information for non-state-owned enterprises and enterprises in the low degree of marketization region.The corporate governance and equity balance play an intermediary role in the influence of Shanghai-Hong Kong Stock Exchange on the quality of accounting information.The mechanisms of the above conclusions mainly include the following four aspects.（1）The Shanghai-Hong Kong Stock Connect significantly improves the analysts’ attention of listed companies;（2）The Shanghai-Hong Kong Stock Connect significantly improves the level of internal control of listed companies;（3）The opening of Shanghai-Hong Kong Stock Connect enables foreign institutional investors to participate in China’s capital market,and increases the probability of mergers and acquisitions for Chinese listed companies;（4）The Shanghai-Hong Kong Stock Connect improves the media coverage of listed companies.The conclusions of this paper are helpful to understand the role of the ShanghaiHong Kong Stock Connect in corporate governance in China,enrich the research of corporate governance in academic,and provide some references for evaluating the impact of Shanghai-Hong Kong Stock Connect on the company in practice.