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This study examines the impact of capital market liberalization in China on corporate investment efficiency. It finds that a recent reform has restrained overinvestment and improved corporate information disclosure and corporate governance.


For this study, we adopted a recent financial reform in China and used a difference-in-difference model to investigate its impact on corporate investment efficiency. The results indicate that stock market liberalization has significantly improved corporate investment efficiency, primarily by restraining overinvestment. This effect exists chiefly in enterprises without former foreign ownership, those with low analyst coverage, and those that are privately owned. Further analysis reveals that improvements in corporate information disclosure and the corporate governance level are important transmission channels for improved efficiency. This study enriches research on the economic consequences of capital market liberalization and foreign investors’ governance channels, thereby providing implications for governments.

About the Authors

Liao Peng

Liao Peng is a doctoral candidate at the School of Accounting, Southwestern University of Finance and Economics, Chengdu, China.

Liguang Zhang

Liguang Zhang is a senior lecturer of finance in the Accounting School, Chongqing University of Technology, Chongqing, China.

Wanyi Chen

Wanyi Chen is a senior lecturer of accounting in the SILC Business School, Shanghai University, Shanghai, China.