The Impact of China’s Stock Market Openness on Firm Innovation

This study investigates the impact of China’s stock market openness on corporate firm innovation. China launched Shenzhen-Hongkong and Shanghai-Hongkong Stock Connect programs to allow international investors to trade with domestic stocks. The empirical regression results demonstrate that the firms traded with foreign investors highly benefited from quality patents. In addition, the corporate firms profited from the influence of foreign investors on the firm’s innovation based on gaining financial capital, reducing information asymmetry, and efficient stock market price. Thus, our study provides robustness analysis to clarify the positive relationship between stock market openness on firm innovation.