Shanghai-Hong Kong Stock Connect Program,Information Environment And Financing Constraints

On April 10,2014,under the approval of China securities regulatory commission(CSRC),Shanghai-Hong Kong Stock Connect program was officially started.Shanghai-Hong Kong Stock Connect program is consisted of Hong Kong stocks through the Shanghai stock exchange and Shanghai stock through the Hong Kong stock exchange,hereinafter referred to as "Hu Gang Tong".And the stock exchange is officially started on November 17,2014.As a non-market factor in the process of capital market,Hu Gang Tong is a great reform in the process of opening Chinese capital market and is one of the most important factors that affect the Chinese mainland companies.In theory,after joining Hu Gang Tong,the mainland companies have to follow a higher standard of information disclosure and auditing.It can improve the information environment of China capital market and further promote the internationalization and marketization of China's capital market.In fact,the implementation time of Hu Gang Tong is short and other aspects are not yet mature enough,so China's capital market is faced with many challenges.The existing research cannot give clear answer about what kind of impact Hu Gang Tong can bring to China's capital market and Chinese mainland companies.Therefore,based on China's capital market specific institutional background and market environment,this thesis will study whether Hu Gang Tong can improve the information environment and further reduce external financing constraints which the Chinese mainland companies face.In particular,using the data of Hu Gang Tong based on November 17,2014,this thesis use handling accrued items over the past three years(2011,2012 and 2013)and stock price synchronicity to measure information environment.In the meantime,this thesis use cash-to-cash flow sensitivity and the financing constraints of indicators which Biddle built in 2009 to measure companies' external financing constraints,and through multiple linear regression,Logit regression,double difference method(DID)and triple difference method(DDD)method,this thesis get some useful conclusions:(1)after the implementation of Hu Gang Tong,compared to non-Hu Gang Tong,the information environment of companies in Hu Gang Tong has improved.(2)after the implementation of Hu Gang Tong,compared to non-Hu Gang Tong,the financing constraints of companies in Hu Gang Tong has been alleviated.(3)after the implementation of Hu Gang Tong,compared to non-Hu Gang Tong,the financing constraints alleviate more for the companies in bad information environment compare to the companies in good information environment.According to the regression results,this thesis argues that the policy of Hu Gang Tong can improve the China capital market information environment and further alleviate the external financing constraints Chinese mainland companies faced,so that Hu Gang Tong can improve the operational efficiency of China capital market and promote the mainland capital market to be mature and perfect.