Research on the Resource Allocation Function of the Chinese Stock Market

Author: Xu Pei
Publisher:
Publish Date: 2006-09-01
Features: Resource allocation is the fundamental purpose of establishing a stock market. Whether the Chinese stock market can promote China's economic growth, empirical studies in existing literature cannot provide a clear standard answer. This book conducts research on this topic, which not only holds significant importance for the practice of China's financial system reform but also, from the perspective of theoretical development, is indispensable for exploring micro-level methods to study the functions of the stock market and financial markets in order to more accurately evaluate the role of financial systems. Based on existing literature, this book provides a theoretical analysis of the resource allocation function of the stock market, deducing the central role of prices in resource allocation and describing the process of resource allocation according to the key role of prices. Subsequently, the book shifts to empirical analysis. First, it studies whether corporate-specific information extracted from stock market prices is related to corporate financing and investment decisions, thereby determining whether the stock market can achieve its resource allocation function through prices. Next, the book statistically analyzes the amount of capital absorbed by different types of enterprises in the stock market, compares the relationship between the MVA values of these different types of enterprises and their operational performance, and examines the rationality of capital flows, further investigating the dependence of corporate operations on stock market capital. Through the above empirical research, the book outlines the extent to which the resource allocation function of the stock market is realized. Based on this, the book proposes that the realization of the stock market's function is not unconditional; each country or a country at a certain stage of its development does not necessarily effectively leverage the stock market's role. It is necessary to reevaluate the role of the Chinese stock market and consider the construction of the financial system based on the degree of economic, credit, and legal system development and adaptability in a country.