Capital Market Opening and Corporate Innovation: Mediating Role of ESG Performance and Financing Constraints

This study uses a quasi-natural experiment of the Shanghai-Hong Kong and Shenzhen-Hong Kong Connect Trading Systems to investigate the role of the capital market opening in fostering corporate innovation. We use panel data for A-listed corporations covering 2009–2021 to construct empirical analysis, and corroborate that the capital market opening can exert significantly positive influences on corporate innovation. The robustness of the research is verified. Furthermore, we conduct quantile analysis to investigate asymmetric effects, and employ multi-phase difference-in-difference-in-difference model, which reveals that the positive effect of capital market opening is more distinctly potent among the heavy polluters and the new-high-tech corporations. Moreover, the results also reflect that the capital market opening can enhance ESG performance and ease financing constraints, which in turn enhances corporate innovation. This study extends the researches on the topic regarding the relationship between capital market opening and corporate innovation, and outlines the theoretical and practical implications of helping foster corporate innovation.