Stock Market Liberalization and Firm Innovation: Evidence from China

Stock Market Liberalization and Firm Innovation: Evidence from China | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Stock Market Liberalization and Firm Innovation: Evidence from China Zhen Cai, Ruting Wang This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8323411/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract We use listed firms data spanning 2010-2017 to study how stock market liberalization affects firm innovation in the context of China, where a quasi-natural experiment called "the China Connect " was conducted in 2014. The difference-in-difference is employed to identify the causal effect and we find that stock market liberalization has significant positive effect on corporate innovation and the marginal effect features an increasing trend. This relation is robust in propensity score matching, high dimension fixed-effect regressions, double machine learning method and alternative innovation measures. Stock market liberalization can not only bring direct knowledge spill-over effect that help firms innovate in both known and unknown areas, but also improve the financing quality and stability of listed firms in stock market. Meanwhile, it can improve the insurance for firm managers against innovation failures. Stock market liberalization Innovation Double machine learning Corporate governance Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8323411","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":571731096,"identity":"39fe9fe2-f021-4ae4-93f3-750fda6e0d2f","order_by":0,"name":"Zhen Cai","email":"","orcid":"","institution":"Sun Yat-sen University","correspondingAuthor":false,"prefix":"","firstName":"Zhen","middleName":"","lastName":"Cai","suffix":""},{"id":571731099,"identity":"a8dddf5f-7cea-4fd0-943c-56ddd2faf4d1","order_by":1,"name":"Ruting Wang","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAABBUlEQVRIiWNgGAWjYPACGzkGBsbGAzCuBGEdCWnGQC0NJGk5lNgApIjTYnD87OHXlT8OpK9tPwy05c9he4MDzAdv8zDY5eHUciYvzfJMwp3cbWcSGw4wth1O3HCALdmahyG5GJcWswM5ZoYNCc9ytx0AaWk4nGBwgMdMmofhANipWLWcfwPScjjd7PxDmMP4v+HXciPH+CFQS4LZDaAtDGyHGTcc4GHDq8X+xhszxoa0NMNtN4C2JLalJ848zGZsOccgGacWyf4c448NNjbyZufTHz748Mfanu9488MbbyrscGoBAjZELCQwNDMwMINYBrjVAwHzByROHV6lo2AUjIJRMDIBADRoZAA4RJfNAAAAAElFTkSuQmCC","orcid":"","institution":"Sun Yat-sen University","correspondingAuthor":true,"prefix":"","firstName":"Ruting","middleName":"","lastName":"Wang","suffix":""}],"badges":[],"createdAt":"2025-12-10 05:53:28","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-8323411/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-8323411/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":99868956,"identity":"b0c1c1d4-75ce-469a-a664-0be8ae548e35","added_by":"auto","created_at":"2026-01-09 08:50:40","extension":"json","order_by":0,"title":"","display":"","copyAsset":false,"role":"acdc-reference","size":3525,"visible":true,"origin":"","legend":"","description":"","filename":"f72b6509508d40e5b4e5b1040dfaabe3.json","url":"https://assets-eu.researchsquare.com/files/rs-8323411/v1/8b7345e335edceb220a75297.json"},{"id":107483788,"identity":"ec2f57e4-6c16-4c2d-946a-898f4eacd7fc","added_by":"auto","created_at":"2026-04-22 02:29:41","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":529713,"visible":true,"origin":"","legend":"","description":"","filename":"Draft.pdf","url":"https://assets-eu.researchsquare.com/files/rs-8323411/v1_covered_01a57c05-da9d-4063-a97b-2e91d71ff45e.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Stock Market Liberalization and Firm Innovation: Evidence from China","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Stock market liberalization, Innovation, Double machine learning, Corporate governance","lastPublishedDoi":"10.21203/rs.3.rs-8323411/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-8323411/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"We use listed firms data spanning 2010-2017 to study how stock market liberalization affects firm innovation in the context of China, where a quasi-natural experiment called \"the China Connect \" was conducted in 2014. 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