Capital market opening and stock price crash risk-Evidence from the Shanghai-Hong Kong stock connect and the Shenzhen-Hong Kong stock connect

The capital market opening policies of Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect offer international investors an approach to investing directly in Mainland China stock markets. In this paper, we investigate the impact of the capital market opening policies on the stock price crash risk in China. With a dynamic difference-in-difference (DID) model, we find that capital market opening policies significantly reduce the stock price crash risk with a dynamic difference-in-difference (DID) model. Also, we study the influence mechanism of the capital market opening to reduce the stock price crash risk. We find that the capital market opening policies reduce the stock price crash risk by improving corporate gover-nance and increasing information transparency. Furthermore, we find that the effect of the capital market opening policies is more pronounced among state-owned companies and high-tech industries.