B1031115_论文终稿.doc

Cross-Border Equity Investment and Market Integration: Practice of Chinese Stock Market Rui Ouyang Research Center Shanghai Stock Exchange Shanghai, P.R.China E-mail : ruiouyang@ Lei Chen Research Center Shanghai Stock Exchange Shanghai, P.R.China E-mail : leichen2@ Abstract—This paper examines the impact of cross-border equity investment on stock market integration based on samples of Chinese listed companies from 1998 to 2008. The empirical results show that foreign shareholdings significantly improve the market integration level of Chinese stock market with global market. Specifically, institutional shareholders considerably enhance the market integration level, whilst individual foreign shareholders have non-significant influence. Among the foreign institutional investors, the investors holding B shares and H shares have a positive effect on the market integration, while qualified foreign institutional investor has little influence. Both financial and non-financial foreign institutional shareholders have similar influence over the market integration. Keywords-foreign shareholders; market integration; Chinese stock market Introduction The progress of international work division system upgrades the integration level of global economics. As a consequence, the integration of capital market has attracted lots of attention by academic researchers. Especially, since many developing countries opened their capital market in 1990s and enabled foreign investors access to the domestic stock market [1], it has became a focus of the Development Economics whether this opening improves their market integration with world market. The enhancement of market integration has a marked impact on developing countries’ macroeconomic development and financial revolution [2][3], including easier and cheaper accesses to external finance [4], resources allocation efficiency, financing costs, the ability of domestic investors to diversify risk, stock price volatility, global capital flo