Stock Market Liberalization and Spurious Herding:The Evidence from the"Shanghai-Shenzhen-Hong Kong Stock Connect"Mechanism
As the most significant institutional innovation in the stock market liberalization process in China recently,the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect has promoted China's capital market into a new stage of high-level opening-up.Since the opening of the Shanghai-Shenzhen-Hong Kong Stock Connect,the eligible firms that are subject to the Shanghai-Shenzhen-Hong Kong Stock Connect have been favored by institutional investors such as securities investment funds,showing an obvious phenomenon of"fund holding together".However,some non-Shanghai-Shenzhen-Hong Kong Stock Connect eligible firms received little attention and positions from institutional investors during this period.Therefore,it is necessary to explore the impact of stock market liberalization on the herding behavior of institutional investors.China's A-share listed companies in Shanghai from 2008 to 2020 and A-share listed companies in Shenzhen from 2012 to 2020 were selected as initial samples,and staggered DID was employed to examine the effect of stock market liberalization on institutional herding.Further,if the Shanghai-Shenzhen-Hong Kong Stock Connect does trigger institutional herding,the au-thenticity of this herd behavior can be distinguished by analyzing the relationship between institutional herding and market pri-cing efficiency.At the same time,this study examines the mechanism through which stock market liberalization affects institu-tional herding.This study finds that compared with non-eligible firms,the Shanghai-Shenzhen-Hong Kong Stock Connect intensifies in-stitutional herding in eligible firms.Moreover,after the launch of the Shanghai-Shenzhen-Hong Kong Stock Connect,for the eligible firms with more serious institutional herding,the stock mispricing phenomenon has been corrected,and the stock price delay has also been reduced.The above research results indicate that institutional herding triggered by the Shanghai-Shenzhe-Hong Kong Stock Connect is spurious herding driven by common information,which is conducive to the faster integration of information into stock prices and the improvement of pricing efficiency in the capital market.Further research shows that the Shanghai-Shenzhen-Hong Kong Stock Connect mainly enhance the spurious herding by improving the information disclosure quality of the eligible firms.The results of the Heterogeneity tests show that the promoting effect of the Shanghai-Shenzhen-Hong Kong Stock Connect on spurious herding is stronger among firms with Hong Kong investors in the top ten shareholders,firms with high growth,and non-state-owned firms.This study helps to deepen the understanding of the theory of institutional herding,clarifies the economic consequences of stock market liberalization,and has an important reference for speeding up the construction of an open economic system.
stock market liberalizationherding behaviorinstitutional investorsShanghai-Shenzhen-Hong Kong Stock Con-nectmarket pricing efficiency
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