Summary:
The 20th National Congress of the Communist Party of China proposed that China adhere to a high level of opening up, providing a scientific guideline for coordinating institutional openness and risk prevention in the capital market. The institutional opening up of the capital market has led foreign capital sources to pay increasing attention to China's A-share market, and cross-border capital flows have become more frequent than in the past. Simultaneously, the impact of climate risk has led to increased uncertainty in relation to financial risks. This article takes commonality in liquidity (CiL) at the level of the links between individual stocks and the market as a starting point and uses listed companies on the Shanghai and Shenzhen A-share markets from January 2011 to December 2019 as the research sample. It focuses on the micro-level of enterprises' systemic liquidity risk, studies the differentiated impact and overlapping effects of the institutional opening up of the capital market on systemic liquidity risk, and analyzes the underlying reasons for these effects based on the channels of action and exogenous institutional arrangements. Furthermore, this article incorporates climate risk factors to examine the impact of physical and transitional risks on the stability of the market for foreign institutional investors. The results show that, first, the institutional opening up of the capital market generally reduces the CiL of open stocks, playing a stabilizing role in the market. However, in contrast with the Shanghai/Shenzhen-Hong Kong (SH/SZ-HK) Stock Connect policy, the inclusion of A-shares in the MSCI index significantly weakens this CiL-reducing effect. Second, the mechanism analysis shows that the SH/SZ-HK Stock Connect policy mainly plays a stabilizing role in the market by reducing the transactions of institutional investors and increasing the quality of information disclosure, whereas the inclusion of A-shares in the MSCI index increases the correlated trading behavior of institutional investors, and offsets the impact of improved information transmission, which weakens the effect of the policy in terms of reducing CiL. The relaxation of cross-border capital quotas, which increases foreign capital inflows, and the difficulty of supervision are important reasons for this effect. Third, further research on the impact of climate risk shows that when companies are hit by extreme weather disasters, are located in areas with high pollution levels or undergoing central environmental protection inspections, or when they are under intensive pollution monitoring, the stabilizing effect of the opening up of the capital market is weakened considerably, indicating that foreign institutional investors take climate risk factors into account in investment decision-making. We conclude that the institutional opening up of the capital market plays a role in stabilizing the market and reducing systemic risk, but it is necessary to further align the important relationship between opening up and risk supervision, and to pay attention to the low-carbon leadership role of institutional investors. The innovate contributions of this article are as follows. First, it analyzes the impact of different internationalization policies on the CiL effect on the capital market, and reveals the underlying mechanism and reasons behind this phenomenon. In contrast with the comparative analyses of the global capital market liquidity commonality phenomenon by Karolyi et al. (2012) and Moshirian et al. (2017), this article focuses on a homogeneous institutional environment, which is conducive to focusing on the net effect of the policies to open up the capital market. Second, the inclusion of climate risk factors expands the research perspectives on institutional investors and financial risk, enriching the literature. This article selects multiple influencing factors for heterogeneity testing from the perspectives of physical and transformation risks, and expands the literature by incorporating climate risk into the research framework for micro-enterprise systematic risk. Under the new development background, an important future research direction is to explore the benign interactions between domestic and foreign institutional investors with different investment styles, as well as their long-term impact on systemic risk.
李金甜, 毛新述. 资本市场制度型开放与流动性共性效应——兼论气候风险的影响[J]. 金融研究, 2023, 515(5): 170-188.
LI Jintian, MAO Xinshu. Capital Market Institutional Opening Up and Liquidity Commonality —Extending Research to the Impact of Climate Risk. Journal of Financial Research, 2023, 515(5): 170-188.
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