Cross-border Regulatory Arbitrage and Judicial Conflicts: A Dynamic Game Study Based on the Land-Hong Kong Connect Mechanism

With the development of global financial market interconnectivity, differences in securities regulatory regimes in different jurisdictions trigger cross-border securities regulatory arbitrage. Enterprises take advantage of the regulatory rule gap to circumvent strict regulation by listing or trading in different places. Although such behavior helps firms reduce compliance costs, it may bring problems such as regulatory competition and cross-border risk transmission. This paper takes the regulatory game between mainland China and Hong Kong as an example, constructs a dynamic game model including mainland regulators, Hong Kong regulators, and cross-border arbitrageurs, and analyzes the interaction of the strategies of each party and the equilibrium results. It is found that the regulatory differences and the conflict of enforcement authority cause the game equilibrium to deviate from Pareto optimality. When the regulators of the two places act separately, the arbitrageurs choose to violate arbitrage as the equilibrium strategy, the mainland regulators bear the risk of regulatory failure, and the cooperative regulation can make all three parties gain positively and maintain market stability. However, due to the high cost of cooperation and insufficient incentives, the optimal social outcome is difficult to realize autonomously. For this reason, policy intervention is needed to coordinate regulatory conflicts of interest, bridge legal differences, and lower the threshold of collaboration in order to achieve effective harmonization of cross-border securities regulation.