Capital Market Liberalization and Inter‑City Corporate Investment

As a core component of institutional reform in China's financial system, capital market liberalization raises an urgent and critical question: Can it overcome financing barriers and information frictions that hinder cross-regional capital flows, thereby advancing the development of a unified national market? Using the official launch of the Shanghai-Hong Kong Stock Connect as a quasi-natural experiment, this study constructs a difference-in-differences model based on data from A-share listed companies between 2000 and 2024 to systematically examine the impact of capital market opening on corporate cross-regional investment. The findings show that the implementation of the Shanghai-Hong Kong Stock Connect significantly promotes firms' investments across regions, a result that remains robust after a series of sensitivity tests. Mechanism analysis reveals that capital market liberalization operates through three channels: improving corporate information disclosure quality to reduce information identification costs in distant markets, alleviating financing constraints to broaden funding sources for cross-regional expansion, and increasing institutional investors' shareholdings to strengthen external oversight over management's cross-regional investment decisions. This research offers a new perspective on the microeconomic consequences of capital market liberalization and provides empirical support based on firm-level data for overcoming institutional barriers to capital mobility and advancing the construction of a unified national market through financial supply-side reforms.