Capital market opening and related party transactions: quasi-natural experimental evidence from China

This study takes a quasi-natural experiment from China, the 'Shanghai/Shenzhen - Hong Kong Stock Connect policy', as the research background to study the relationship between capital market opening and related-party transactions (RPTs) in listed companies. Based on DID analysis and subsequent robustness tests, capital market opening policies significantly inhibit related-party transaction behaviours in listed companies. Further analysis reveals that the mechanism behind this effect lies in its ability to enhance information transparency and improve financial performance of listed companies. The study also finds that this mechanism is primarily driven by abnormal related-party transactions, financing-related transactions, and large-scale transactions. Moreover, these policies have a more pronounced effect on privately-owned companies and those with weaker external auditing supervision. This paper enriches the research on the consequences of capital market opening and expands the study of factors influencing corporate related-party transaction behaviours, providing empirical evidence for further deepening capital market opening and corporate governance in emerging market countries.