Working Paper: NBER ID: w20121
Authors: Murillo Campello; Rafael P. Ribas; Yan Wang
Abstract: The 2005 split-share reform in China mandated the conversion of nontradable stocks into tradable status. This paper examines the effects of stock markets on corporate outcomes exploiting multiple institutional features of the Chinese conversion program. Using a generalized propensity score matching approach, we identify increases in corporate profitability, investment, value, and productivity as a result of the reform. We also identify changes in firms' likelihood to issue shares and engage in mergers, as well as changes in dividend and capital structure policies. Our findings provide insights on the role of stock markets in shaping corporate activity and on the impact of regulation on economic growth.
Keywords: stock market; corporate outcomes; China; split-share reform
JEL Codes: C21; D22; F30; G31; O16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 2005 split-share reform (G34) | corporate profitability (G30) |
| conversion of nontradable shares into tradable ones (F16) | corporate profitability (G30) |
| 2005 split-share reform (G34) | investment in fixed assets (G31) |
| 2005 split-share reform (G34) | return on equity (D33) |
| 2005 split-share reform (G34) | ratio of sales to capital (G31) |
| 2005 split-share reform (G34) | corporate financing strategies (G32) |
| 2005 split-share reform (G34) | leverage ratios (G32) |
| 2005 split-share reform (G34) | dividend payments (G35) |