Capital market liberalization and corporate financing efficiency

Using A-share listed firms in China from 2008 to 2024, this paper examines the effect of capital market liberalization on corporate financing efficiency. The results show that capital market liberalization significantly improves financing efficiency, and the finding is robust to a battery of robustness checks. Mechanism analyses indicate that liberalization improves the information environment, stock liquidity, and external monitoring. The analysis of heterogeneity shows that the effect is stronger for non-state-owned firms and for firms with lower managerial myopia, weaker internal governance, and lower organizational inertia.