Stock Market Liberalization and Innovation

58 Pages Posted: 2 Mar 2014 Last revised: 19 Apr 2018

See all articles by Fariborz Moshirian

Fariborz Moshirian

Institute of Global Finance, UNSW Business School

Xuan Tian

Tsinghua University - PBC School of Finance

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen

Wenrui Zhang

The Chinese University of Hong Kong (CUHK) - Department of Finance

Date Written: April 9, 2018

Abstract

We investigate the effect of stock market liberalization on technological innovation. Using a sample of 20 economies that experience stock market liberalization, we find that these economies exhibit a higher level of innovation output after liberalization, and this effect is disproportionately stronger in more innovative industries. The relaxation of financial constraints (the financing channel) and enhanced risk-sharing between domestic and foreign investors (the risk-sharing channel) are two plausible mechanisms that allow stock market liberalization to promote innovation. We, however, do not find supportive evidence for the corporate governance channel. Finally, we show that technological innovation is a mechanism through which stock market liberalization affects economic growth. Our paper provides new insights into the real effects of stock market liberalization on growth and on the economy.

Keywords: stock market liberalization; innovation; equity financing; risk-sharing

JEL Classification: G15, O30, F63

Suggested Citation

Moshirian, Fariborz and Tian, Xuan and Zhang, Bohui and Zhang, Wenrui, Stock Market Liberalization and Innovation (April 9, 2018). Available at SSRN: https://ssrn.com/abstract=2403364 or http://dx.doi.org/10.2139/ssrn.2403364

Fariborz Moshirian

Institute of Global Finance, UNSW Business School ( email )

Sydney, NSW 2052
Australia
+61 2 93855859 (Phone)
+61 2 94877519 (Fax)

Xuan Tian (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

Bohui Zhang

The Chinese University of Hong Kong, Shenzhen ( email )

Wenrui Zhang

The Chinese University of Hong Kong (CUHK) - Department of Finance ( email )

Shatin, N.T.
Hong Kong

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