Stock market liberalization and innovation

Fariborz Moshirian, Xuan Tian, Bohui Zhang, Wenrui Zhang

Research output: Contribution to journalArticlepeer-review

94 Citations (Scopus)


We investigate the effect of stock market liberalization on technological innovation. Using a sample of 20 economies that experience stock market liberalization, we find that these economies exhibit a higher level of innovation output after liberalization and that this effect is disproportionately stronger in more innovative industries. The relaxation of financial constraints, enhanced risk sharing between domestic and foreign investors, and improved corporate governance are three plausible channels that allow stock market liberalization to promote innovation. Finally, we show that technological innovation is a mechanism through which stock market liberalization affects productivity growth and therefore economic growth. Our paper provides new insights into the real effects of stock market liberalization on productivity growth and the economy.
Original languageEnglish
Pages (from-to)985-1014
Number of pages30
JournalJournal of Financial Economics
Issue number3
Publication statusPublished - Mar 2021
Externally publishedYes


  • Stock market liberalization
  • Innovation
  • Equity financing
  • Risk sharing
  • Corporate governance


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