The impact of stock market liberalization on long-term investment: Evidence from mainland-Hong Kong stock connect programs in China

This study examines the impact of stock market liberalization on long-term investment and its underlying mechanisms in the context of the Mainland-Hong Kong Stock Connect programs in China. The difference-in-differences estimation based on the propensity-score-matched sample suggests that stock market liberalization increases long-term investment by relieving financing constraints and restraining managerial myopia. Our results are more pronounced among privately owned firms, firms with foreign investors among the top ten shareholders, and firms in industries with long payback periods. Together, our findings suggest that stock market liberalization has a positive effect on managerial investment decisions.