| The Mainland-Hong Kong Stock Connect,known as the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Market Trading Connectivity Mechanism,is an important pilot design for China’s capital market to fully open up to the outside world.Its main responsibility is to connect the Shanghai(Shenzhen)Stock Exchange with the Hong Kong Stock Exchange,so that investors in the mainland and Hong Kong can buy stocks in different markets through local intermediaries.In other words,the Shanghai-Shenzhen-Hong Kong Stock Connect is an important bridge for capital exchange between the two places.With the transformation of China’s capital market from closed to open,the coverage of Shanghai-Shenzhen-Hong Kong Stock Connect is also developing and changing rapidly.When China joined the World Trade Organisation in 2001,it pledged to open its capital markets to 20 per cent foreign investors in 15 years’ time.Yet as the 2014 deadline approached,foreign investors accounted for less than 3 per cent.Under such circumstances,the Shanghai-Hong Kong Stock Connect came into being on November 17,2014,with 568 stocks participating in the first batch.In the two years after its implementation,the Shanghai-Hong Kong Stock Connect has achieved good results with frequent capital circulation between the two places.In order to further open up China’s capital market,the Shenzhen-Hong Kong Stock Connect was formally implemented on December 5,2016.So far,nearly 1,300 stocks have participated in the Shanghai-Shenzhen-Hong Kong Stock Connect,with accumulated turnover approaching 10 trillion yuan,bringing a net capital inflow of more than 1 trillion yuan to the mainland market.The implementation of connectivity mechanism can enhance the comprehensive strength of China’s capital market at the macro level,enhance the attractiveness of China’s capital market to overseas investors,improve the international status of RMB,and promote the internationalization process of RMB.At the micro level,by attracting investors from more mature markets,the governance level of China’s listed companies can be improved to a certain extent and management opportunism can be restrained.However,due to the short implementation time of the interconnection mechanism,the academic research on its impact on the capital market and its mechanism of action is still in its infancy.In particular,there are great differences in the influence of corporate internal governance mechanism.Some people believe that the Shanghai,Shenzhen-Hong Kong Stock Connect is only a partial opening event,which does not cover all listed companies.Moreover,it still maintains the upper limit on foreign shareholding ratio,so it is not fundamentally different from the previous QFII.These restrictions make it difficult for foreign investors to influence corporate governance.However,some people believe that the Mainland-Hong Kong Stock Connect is a pilot program for comprehensive capital market opening.Regulators and the capital market have adjusted the system and policies according to the implementation of the policies.Therefore,the Mainland-Hong Kong Stock Connect is of great significance to China’s capital market.This paper explores how the interconnection mechanism represented by the Mainland-Hong Kong Stock Connect can influence corporate behavior through improving corporate governance,and discusses it from the more specific perspective of corporate investment activities.Firstly,combining the financial inhibition theory and financial deepening theory of classical economics,this paper analyzes the influencing factors of a country’s closed or open capital market.Secondly,based on principal-agent theory,information asymmetry theory,market segmentation theory and non-efficient investment theory in institutional economics,this paper deeply analyzes the anomalies in closed or semi-closed capital markets.These anomalies cannot be solved by closed capital market relying on internal circulation,so it is concluded that capital market must be open.Thirdly,according to the origin,course and current development of China’s capital market opening,several entry points are selected,which are combined with the existing western mature theories and strive to combine the theories with China’s reality.Finally,the paper systematically sorts out the domestic and foreign literature about capital market opening.It mainly includes capital market opening and macro-economy,capital market opening and market efficiency,capital market opening and enterprise behavior.Through sorting out the above literature,this paper finds that the influences of capital market opening on different countries,different markets and different enterprises are quite different.The positive effects of opening-up on the country and market are mainly concentrated in some countries with stable political situation,prosperous economy and perfect internal market.The negative effects mainly occur in countries with political instability,economic downturn,imperfect domestic industries and backward consumer goods markets.The positive effects of openness on enterprises are mostly found in enterprises with good operating performance but complicated ownership structure due to listing.The negative effects mainly exist in poor operating performance and single ownership structure.Or,to put it another way,there are pyramid companies.Thus it can be seen that the research conclusion on the economic consequences of the opening of the capital market is not a definite problem,but a complex problem that needs to be subdivided and studied in combination with the characteristics of the objects studied.For China,under the strong leadership of the Party,both the macro economy and the capital market have developed in an orderly manner in strict accordance with the five-year plans implemented at different stages.Therefore,the opening of the capital market will promote the economy and the market.But for enterprises,have long existing problems,such as mergers and acquisitions,ignore the innovation and the financialization of correlation as a big dye-jigger,not only makes the past events such as the B shares of local capital markets opening,A + H cross-listings and QFII is difficult to play its positive effect on the capital market,also makes foreign capital assimilation in our country,by the investors to speculators.Therefore,the question this paper is concerned about is whether a more comprehensive capital market opening event can curb these inefficient investment phenomena of enterprises?In order to study this problem,this paper also reviews the literature on the factors affecting the investment behavior of enterprises,which lays a theoretical and literature foundation for the subsequent research on capital market opening and enterprise investment.On the basis of theoretical analysis and literature review,this paper conducts research from the following aspects and draws corresponding conclusions:First,the government has repeatedly issued policies stressing that "the virtual economy must serve the real economy",pointing out that the real economy is the pillar of the country’s development.However,a large number of enterprises have abandoned their businesses and invested in speculative fields such as finance and real estate.After the implementation of Shanghai-Hong Kong Stock Connect in 2014,it has a profound impact on the micro-investment behavior of enterprises.In this paper,the research found for micro enterprise’s investment decision-making behavior and capital market opening has a certain meaning:Shenzhen port mechanism introduced a large number of foreign institutional investors,helps to reduce the speculation of the company,alleviate management myopia,avoid to cater for the short-term stock price rise of the financial investment,optimize the corporate governance level.Therefore,we should affirm the external governance effect of capital market opening,improve the market opening mechanism,and emphasize that the virtual economy should better serve the entity,encourage enterprises to "get rid of the virtual to the real",and promote the healthy development of the real economy.This main finding also verifies that under the current economic system environment in China,financial investment presents more "crowding out effect" than "reservoir effect" for physical investment.Second,enterprises are the main body of technological innovation.The innovation will and innovation ability of enterprises are directly related to the implementation effect of national strategy and the future development of China’s economy.Enterprise technological innovation is highly dependent on the capital market.The degree of development,liquidity,volatility and information environment of the capital market will significantly affect the enterprise’s ability to obtain innovative funds and willingness to carry out innovative activities.This paper finds that the opening of capital market can increase the international vision of China’s listed companies,connect them with foreign resources,and provide them with the funds needed for innovation activities,so as to improve their innovation ability.Further analysis showed that,after the capital market opening to the outside world,R&D and promotion of patent output in those institutions stake originally low,low information transparency is low and management vision,more obvious in the enterprises of the agency problem is more serious,that the capital market is open by enhancing the governance effect of foreign investors,improve enterprise information disclosure and alleviate the agency problem in innovation decision to promote enterprise innovation.Since corporate executives are the main decision-makers of M&A,their behaviors will directly affect the performance of M&A.Existing studies have provided a large number of executives’ personal characteristics,motivations and behavioral decisions on the impact of mergers and acquisitions,and found that the more serious the agency problem,the less satisfactory the performance of mergers and acquisitions.Therefore,solving the agency conflict between shareholders and managers is the key to improve the performance of M&A.This paper finds that the implementation of The Shanghai and Shenzhen-Hong Kong Stock Connect can effectively alleviate agency problems and promote the short-term and long-term M&A performance of companies.Such enhancement effect is more significant in the sample of companies with strong management power,related M&A and low stock pricing efficiency.Based on the analysis of the economic consequences after the opening up of China’s capital market,this paper considers a series of effects brought by the Shanghai,Shenzhen and Hong Kong stock Connect policy as an internal and external governance mechanism for the target listed companies.From the micro perspective of investment decisions of listed companies,this paper makes an in-depth analysis of the impact of the Mainland-Hong Kong stock Connect mechanism on corporate investment,which provides a micro supplement to the relevant research on capital market opening.The research value of this paper is mainly reflected in the following aspects:First of all,starting with the concrete behavior of enterprise investment,this paper examines the possible influence of capital market opening on the real economy,and theoretically expands the research framework of the economic consequences of capital market opening.Secondly,the external event of capital market opening is used to test the causal relationship between foreign shareholders and enterprise decision-making,which makes up for the defects of existing literature.Finally,the regulation and intermediary effects of the heterogeneity of governance structure and information environment on capital market opening and enterprise investment efficiency are tested,and the mechanism of the effect of capital market opening to the real economy is explored from multiple perspectives. |
