Stock Market Liberalization and Innovation

61 Pages Posted: 2 Mar 2014 Last revised: 14 Dec 2020

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: December 2, 2019

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, enhanced risk-sharing between domestic and foreign investors, and improved corporate governance are three plausible channels that allow stock market liberalization to promote innovation. Finally, we show that technological innovation is a mechanism through which stock market liberalization affects productivity growth and therefore economic growth. Our paper provides new insights into the real effects of stock market liberalization on productivity growth and the economy.

Keywords: stock market liberalization; innovation; equity financing; risk sharing; corporate governance

JEL Classification: G15; O30; F63

Suggested Citation

Moshirian, Fariborz and Tian, Xuan and Zhang, Bohui and Zhang, Wenrui, Stock Market Liberalization and Innovation (December 2, 2019). Journal of Financial Economics (JFE), Forthcoming, 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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