Foreign Investor Access and Stock Price Informativeness around China’s Stock Connect Programs

초록

This study examines whether China’s Stock Connect programs are associated with changes in the information environment of A-share listed firms through a transparent, rule-based eligibility mechanism. Using a stock-year panel of A-share firms listed on the Shanghai and Shenzhen Stock Exchanges over the 2010–2021 sample period, which spans the staggered eligibility changes, we estimate firm fixed-effects difference-in-differences models and supplement the baseline specification with event-time analyses, matched-sample tests, index-membership controls, two-way clustered inference, and heterogeneous treatment estimators following Sun and Abraham (2021) and Callaway and Sant’Anna (2021). The results indicate that, after a stock becomes eligible, return synchronicity declines by about 0.060, which corresponds to approximately 9.8% of the absolute sample mean, while crash-risk proxies also decline. Dynamic estimates reveal no statistically meaningful differential pre-trends and show that post-eligibility effects strengthen gradually over time. Cross-sectional and interaction-based analyses further show stronger associations among firms with weaker initial information environments. Mechanism tests show that eligibility is associated with higher northbound holdings, and specifications that additionally control for contemporaneous or lagged foreign participation attenuate the estimated eligibility coefficients. We interpret these mechanism results as channel-consistent rather than as evidence of causal mediation. The findings contribute to the literature on capital market liberalization by showing that a rule-based opening mechanism is associated with more informative prices and lower opacity-related downside risk in a major emerging market.

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