Research On The Impact Of The Investment Size Of Shanghai-Hong Stock Connect Program On The AH Shares Premium Level

With the development of the world economy, single capital market has been unable to meet the financing needs of enterprises, cross-listing has become an important way for enterprises to achieve a number of capital market financing. Under such background, more and more domestic high quality enterprises have chosen to list overseas, especially in Hongkong,due to its superior geographical position and mature market environment.Since Tsingtao Brewery(0168.HK) Listed in the H shares market in 1993, the problem of A shares and H shares with different prices has been there because of capital market segmentation between the Mainland capital market and Hong Kong capital market.The market segmentation led to the unique phenomenon of foreign shares discount in China, that is to say A shares relative to B shares premium and A shares relative to H shares premium. AH premium problem has been an important factor plagued by mainland enterprises to realize A+H shares market cross-listing.According to the arbitrage pricing theory,the differences of same products price in different market can be eliminated by arbitrage mechanism.But by the market segmentation conditions, the arbitrage cost is so high that arbitrage mechanism is difficult to play a role.The stock market segmentation has violated the law of one price,the same stock and right are not the same price.The existence of the price differences couldn’t make the value of the company manifested in the market reasonably,which would influence the efficiency of enterprises financing through multiple market and increase the enterprise’s financing costs.How to eliminate market segmentation is the only way to achieve the healthy development of stock market.However,Shanghai-Hong Stock Connect program is like a bridge connecting Shanghai and Hong Kong realizes the interconnection between Shanghai and Hong Kong stock market.Investors of two sides can buy undervalued stocks and sell overvalued stocks according to their own value judgment, which will promote two market prices return to a reasonable range, lower AH shares premium level.Using the fixed effect panel model and taking 49 A+H cross-listing Corporation as the research sample, the paper studies the impact of the changes in investment scale of Shanghai-Hong Stock Connect program on the AH shares premium level, By controlling the difference of liquidity, risk preference, information asymmetry, demand elasticity and exchange rate. The empirical results show that, with the continuous expansion of the investment scale of Shanghai-Hong Stock Connect program, AH shares premium level will be significantly reduced, this result is consistent with the expectations of this article. In order to verify the stability of the main results, this paper uses a number of models to verify the results of regression, the results are also very ideal. Finally, according to the results of empirical analysis, some policy recommendations and future research directions are put forward to eliminate market segmentation and reduce AH shares premium level.