We re-conceptualize corporate debt default risk (EDF) as an emergent state variable of a coupled financial system and ask how capital-market opening reshapes its equilibrium. Extending the structural credit-risk framework with three interacting subsystem channels—external financing, investment efficiency, and information disclosure—we derive a closed-form result showing that an exogenous increase in liberalization strictly reduces the system-level corporate debt default probability through three complementary channels. We then exploit the staggered roll-out of China’s Shanghai–Hong Kong and Shenzhen–Hong Kong Stock Connect (HSGT) programs as a quasi-natural experiment on a panel of 21,351 firm-year observations over 2011–2023. A difference-in-differences (DID) estimator confirms a significant stabilizing effect on the firm’s market-implied default probability that is robust to an extensive battery of identification and specification checks; mechanism regressions confirm all three model-implied channels. The stabilizing effect is further amplified in firms facing greater environmental uncertainty and greater customer concentration—precisely the regimes in which our model predicts the underlying subsystem coupling to be most fragile. Our findings recast capital-market opening as a system-level intervention that simultaneously re-balances financing, investment, and information subsystems of the financial system, with implications for financial-stability policy in emerging economies.
This study analyzes the microstructural mechanisms through which the rapidly expanding single-stock leveraged ETFs in the Korean capital market impede the price discovery function and amplify endogenous volatility. Based on a dynamic simulation utilizing the actual market scales of large-cap semiconductor stocks, the results demonstrate that mechanical, pro-cyclical rebalancing concentrated at the market-on-close (MOC) induces directional distortion, systematically driving asset prices away from their fundamental values depending on market conditions. In particular, this study provides evidence that as the assets under management (AUM) of these linked products expand, the liquidity breakdown threshold of the limit order book declines steeply. Consequently, even minor illiquidity frictionscan cause mechanical selling pressure to escalate directly into tail risk. Drawing on these findings, this study offers policy implications to enhance macroprudential stability and prevent the transmission of microstructural risks into systemic risks. Specifically, we propose the introduction of dynamic AUM caps, the normalization of creation fees to mitigate structural conflicts of interest among Authorized Participants (APs), and restrictions on listing ultra-high leveraged products.
Interest rate liberalization pressures Chinese listed banks to expand non-interest in-come, yet prior research overlooks capital-market valuation responses. Using a bal-anced panel of 24 A-share banks (2015–2024, 240 observations) with two-way fixed-effects regressions, we find that non-interest income ratio (NIIR) significantly boosts ROE (β=0.055, p=0.003) but has no significant effect on market capitalization (p=0.304). Mechanism analysis reveals that investors view fee-based income as pas-sive compensation for shrinking spreads, not sustainable growth, thus denying valua-tion premiums. Credit risk and net interest margins remain key drivers for both prof-its and market prices. This study constructs a dual "accounting profit + market valua-tion" framework, filling a gap in diversification literature, and offers strategic impli-cations for bank management, investors, and regulators to prioritize quality over scale in non-interest businesses.
This paper examines whether the Saudi Capital Market Authority's January 2026 abolition of the Qualified Foreign Investor (QFI) framework coincided with a measurable redistribution of trading activity across listed firms in Tadawul. Using official Saudi Exchange reports, we construct a near-population panel of 267 to 269 firms observed at annual, quarterly, monthly, and daily frequencies spanning 2025 and Q1 2026. The empirical design is framed as event-based evidence around a major market-access reform rather than as a clean natural experiment. We combine cross-sectional OLS, liquidity-sorted portfolio tests, quantile regression, event-window difference-style comparisons, placebo tests, and heterogeneity analyses to trace how activity and returns evolved around the reform window. Three findings organize the results. First, the strongest evidence concerns market activity rather than broad repricing: firms that were more liquid before the reform experienced a statistically significant relative decline in turnover and trade counts during the reform window, with the sharpest adjustment concentrated in the mid-cap segment. Second, the relation between prior liquidity and subsequent returns is heterogeneous across the conditional return distribution rather than monotonic in the mean. Third, placebo, falsification, treatment-definition, and clustering exercises all support the interpretation that the reform window coincided with a redistribution of trading attention away from previously dominant names and toward a broader cross-section of firms. The paper contributes to the literature on capital markets, market microstructure, and market-access reforms in emerging economies by showing that liberalization may first appear in the allocation of trading activity before it appears in average-return differentials. The evidence is therefore most informative about trading-activity reallocation, while causal interpretation remains cautious because treatment is not exogenous, the transition begins before full implementation, and the post-reform horizon is short.
Type of the article: Research ArticleAbstractThis study examines investor reactions to financial statement manipulation in the Vietnamese stock market using a large, unbalanced panel dataset of 11,418 firm-year observations over the 2016–2024 period. The sample comprises 1,398 non-financial companies listed on the HOSE, HNX, and UPCOM, explicitly excluding the financial and banking sectors due to their distinctive regulatory and accounting frameworks. By integrating accrual-based earnings management measures with the M-score model, the research provides novel empirical evidence of asymmetric market behavior. Specifically, investors respond positively to income-increasing earnings management in the short term, while largely ignoring income-decreasing practices. Furthermore, the findings reveal a notable “delayed reaction” phenomenon: fraud risk, as proxied by the M-score, is not immediately incorporated into current stock prices but instead leads to significantly lower future returns. The results also emphasize the M-score’s critical moderating role, demonstrating that the negative impact on future returns is amplified in high fraud-risk environments. Ultimately, this study highlights market inefficiency in an emerging economy and recommends utilizing the M-score as an early warning tool for stakeholders to avoid the earnings illusion trap.AcknowledgmentsThe author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: This work was supported by the Vietnam National University, Hanoi (VNU) under project number QG25.98 (QG25.98).
Capital market liberalization provides foreign investors with greater access to direct investment in mainland China’s stock market. This study uses the expansion of the Shanghai–Hong Kong Stock Connect as a quasi-natural experiment. The sample consists of A-share listed companies on the Shanghai Stock Exchange from the first quarter of 2021 to the first quarter of 2024. Employing a difference-in-difference (DID) model, we examine the impact of the expansion on stock price crash risk among small- and medium-cap stocks in the A-share market. Empirical results show that the Shanghai–Hong Kong Stock Connect expansion significantly increases the stock price crash risk of these stocks. Mechanism analysis reveals that the policy elevates crash risk by aggravating managerial short-termism, reducing information transparency, and weakening corporate governance. Furthermore, we find that this effect is more pronounced in non-state-owned enterprises, firms facing high financing constraints, companies with low free-float market capitalization, and high-tech enterprises. This study offers a new perspective on the relationship between stock connect expansions and stock price crash risk and provides policy insights for improving the Shanghai–Hong Kong Stock Connect and similar market access mechanisms in the future.