The valuation effect of going International: evidence from QDII in China

ABSTRACTThis paper attempts to evaluate the valuation effect of deregulation policy on capital outflows by an event study approach. Using the policy announcement of Qualified Domestic Institutional Investor (QDII) and Bond Connect in China, we find a short-term valuation effect that the stock market responds negatively to the deregulation on capital outflows and firm’s size could act as a shield to defend this shock. Moreover, the financially constrained firms are more negatively affected by this policy shock, suggesting that financial vulnerability is an important force driving down the stock valuation. Finally, both the quality of corporate governance and bureaucratic quality of local government could help firms to avoid valuation loss from this policy shock especially those with tight financial constraints.KEYWORDS: Capital controlscapital outflowsChinese economyvaluation effectJEL CLASSIFICATION: F32F42G32 Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1. https://xueqiu.com/7552001880/163183133.2. We use the minor deregulation events for the robustness check in the following analysis.3. CSI 300 Index aiming to reflect the overall performance of China A-share market consists of the 300 largest and most liquid A-share stocks.4. SSE 50 Index selects 50 largest stocks of good liquidity and representativeness from Shanghai security market. The objective is to reflect the complete picture of those good quality large enterprises, which are most influential in Shanghai security market.Additional informationFundingNational Natural Science Foundation of China (72373112, 72073102). Major Program of the National Social Science Foundation of China(23ZDA037).