Is the Stock Market Just a Side Show? Evidence from a Structural Reform

NBER Working Paper No. 20121

Issued in May 2014

NBER Program(s):Corporate Finance, Development Economics



The 2005 split-share reform in China mandated the conversion of nontradable stocks into tradable status. This paper examines the effects of stock markets on corporate outcomes exploiting multiple institutional features of the Chinese conversion program. Using a generalized propensity score matching approach, we identify increases in corporate profitability, investment, value, and productivity as a result of the reform. We also identify changes in firms' likelihood to issue shares and engage in mergers, as well as changes in dividend and capital structure policies. Our findings provide insights on the role of stock markets in shaping corporate activity and on the impact of regulation on economic growth.

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Document Object Identifier (DOI): 10.3386/w20121

Published: Murillo Campello & Rafael P. Ribas & Albert Y. Wang, 2014. "Is the Stock Market Just a Side Show? Evidence from a Structural Reform," Review of Corporate Finance Studies, Oxford University Press, vol. 3(1-2), pages 1-38. citation courtesy of

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