The Influence Of Shanghai-Hong Kong Stock Connect On The Financialization Of Target Enterprises

China is facing the severe test of economic transition from real economy to virtual economy.The financialization of enterprises makes the development of enterprises gradually deviate from the main business,which is widely concerned by all sectors of society.Therefore,the reform of financial system should be deepened.The gradual opening of capital market is the key to the reform of financial system.In recent years,China has been continuously improving the breadth,depth and width of opening-up.With the implementation of ShanghaiHong Kong Stock Connect(hereafter SH-HKSC)at the end of 2014,a large number of foreign investors can more conveniently participate in the trading of the mainland stock market,which makes China’s capital market more closely connected with the world,thus bringing far-reaching influence to China’s development.SH-HKSC is a gradual opening up,which is reflected in the selection of a limited number of stocks as a pilot.This openness principle enables researches based on this background to clearly identify the enterprises affected and unaffected by SHHKSC,thus overcoming problems such as event identification error and endogeneity in previous studies and enhancing the reliability of research conclusions.Based on this,this paper takes the implementation of SH-HKSC as a quasi-natural experiment,and uses the data of China’s A-share listed companies from 2010 to 2020 to build the differential dual model.Firstly,study the influence of SH-HKSC on the financialization of target enterprises.Secondly,discuss the ways of agency cost and information transparency,and then test nature of equity and irreversible investment and managers overconfidence influence on the relationship between the two.Finally,analyze the two relations in Wind level segmentation industry and heterogeneity between the central,eastern and western regions.This paper draws the following conclusions:(1)SH-HKSC can restrain the financialization of target enterprises.(2)SH-HKSC can restrain financialization of target enterprises by reducing agency costs and improving information transparency of enterprises.(3)The nature of ownership,irreversible investment and overconfidence of managers can all influence SH-HKSC to inhibit the financialization of the target enterprises.Specifically,for enterprises with high state-owned equity and irreversible investment,SH-HKSC has a stronger restraining effect on the financialization of target enterprises.Overconfidence of managers can weaken this inhibitory effect.(4)Further research shows that SH-HKSC can effectively inhibit the financialization of enterprises in four industries,such as industry,public utilities,energy and optional consumption,while it does not significantly inhibit the financialization of enterprises in four industries,such as information technology,daily consumption,medical care and materials.In addition,SH-HKSC’s dampening effect is more pronounced in the eastern region.This paper puts forward the following policy recommendations.Firstly,recommendations for the government:(1)Continuously improve the openness of China’s capital market,increase the introduction of value investors.(2)Gradually open up capital markets to guard against and defuse market volatility risks.(3)Strengthen investment education for domestic investors and guide institutional investors to participate in the governance of shareholding companies.Secondly,recommendations for enterprises:(1)Strengthen enterprise supervision and management system,pay attention to main business development.(2)Management should abandon short-sighted behavior and avoid negative psychology such as overconfidence.