Stock market liberalization and innovation |
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| Authors: | Fariborz Moshirian Xuan Tian Bohui Zhang Wenrui Zhang |
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| Institution: | 1. University of New South Wales, UNSW Business School, Sydney, Australia;2. University of New South Wales, Institute of Global Finance, Kensington, New South Wales, Australia;3. Tsinghua University, PBC School of Finance, Beijing, People''s Republic of China;4. Chinese University of Hong Kong (Shenzhen), School of Management and Economics, Shenzhen, People''s Republic of China;5. Chinese University of Hong Kong (Shenzhen), Shenzhen Finance Institute, Shenzhen, People''s Republic of China;6. Chinese University of Hong Kong, CUHK Business School, Department of Finance, Shatin, Hong Kong;1. Department of Finance, Southern University of Science and Technology, 1088 Xueyuan Blvd., Shenzhen, Guangdong 518055, China;2. Department of Finance and Economics, Rutgers Business School, Rutgers University, 100 Rockafeller Road, Piscataway, NJ 08854, United States;3. Department of Finance, DePaul University, 1 E. Jackson Blvd., Suite 5500, Chicago, IL 60604, United States;1. HKU Business School, The University of Hong Kong, Hong Kong SAR;2. Hong Kong Baptist University, Hong Kong;3. School of Management, Xiamen University, Xiamen 361005, PR China;1. Stanford Graduate School of Business & NBER & CEPR, Knight Way, E264, Stanford, CA 94305;2. Federal Reserve Board, 1801 K Street NW, Washington, DC 20036, United States;1. Carroll School of Management, Boston College, 140 Commonwealth Avenue, Chestnut Hill, MA 02467, USA;2. Swiss Finance Institute at EPFL, Quartier UNIL-Dorigny, Extranef 213, Lausanne CH-1015, Switzerland;3. Carl H. Lindner College of Business, 2906 Woodside Drive, University of Cincinnati, Cincinnati, OH 45221, USA |
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| 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 that 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. |
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