关键词: 资本市场开放, 市场有效, 债务融资成本, 权益融资成本, 加权平均资本成本

Abstract: In 2014 and 2016, the Chinese government respectively passed the implementation acts for “Shanghai-Hong Kong Stock Connection” and “Shenzhen-Hong Kong Stock Connection”. At the same time, President XI Jinping emphasized on multiple occasions, such as the 13th collective study of the Central Political Bureau of the Communist Party of China and the third China International Import Expo, that China would deepen trade and investment liberalization, facilitation, reform, and innovation. Numerous events indicate that the Chinese government continuously eases restrictions on foreign investment in the domestic capital market and expanding corresponding investment channels. The capital market opening has become a key focus for China in practicing its fundamental policy of openness to the outside world. For enterprises, the higher cost of equity financing compared to debt financing, due to the subordinate position of dividend payments to interest and the residual claim of shareholders in case of bankruptcy, makes equity financing less attractive. The entry of foreign capital into the capital market may lead to competition for high-quality investment targets, creating a crowding-out effect on domestic capital. Additionally, to compensate for information asymmetry-related risks, foreign investors in the bond market may demand higher risk premiums, resulting in an increase in the cost of debt financing for enterprises. Moreover, many companies face strong financing constraints, making equity financing their preferred avenue for raising funds. However, equity financing is relatively more “expensive” than debt financing, implying that the entry of foreign capital into Chinese enterprises may not simply lead to a reduction in financing costs due to increased capital supply.
The research in this paper goes beyond the traditional focus on the cost of equity financing in the context of capital market opening. Utilizing quarterly data from Chinese A-share listed companies from 2011 to 2019, the paper calculates the cost of debt financing, cost of equity financing, and weighted average cost of capital for enterprises. It examines the impact of capital market opening on the financing costs of enterprises. Given that existing studies on the impact of capital market opening in the domestic context often rely on event study methods focusing on individual significant events and considering the multitude of measures related to capital market opening with no fixed frequency,relying solely on event study methodology in this study might result in biased empirical outcomes and may not confirm the sustainability of the impact of capital market opening. To comprehensively reflect the potential effects of capital market opening on enterprise financing costs, the paper adopts a panel data model and constructs alternative indicators to dynamically test the effects of capital market opening on enterprise financing costs.
The findings indicate: Firstly, capital market opening leads to an increase in the cost of debt financing for enterprises. The crowding-out effect of foreign capital entry and the collapse of debt financing platforms increase investors' focus on the security of assets, causing the capital utilization cost in the bond market to rise. Secondly, capital market opening results in a decrease in the cost of equity financing for enterprises. The entry of foreign capital into the stock market may drive up stock prices, attracting more potential investors and improving the capital structure of enterprises through an increase in net assets. Therefore, when faced with setbacks in debt market financing, enterprises may turn to equity financing, which, though relatively expensive, becomes a viable option. Thirdly, although capital market opening makes the cost of equity financing cheaper for enterprises, equity financing is more expensive than debt financing. As a result, capital market opening not only encourages enterprises to use equity financing more but also directly leads to a higher weighted average cost of capital, thereby increasing the overall financing costs for enterprises. The scientific validity and reliability of this paper's conclusions are affirmed by the addition of potentially omitted variables and the substitution of key explanatory variables. Additionally, mechanism tests indicate that enhancing accounting robustness helps mitigate the increase in debt financing costs resulting from the opening of the capital market for enterprises. It also strengthens the effect of reducing equity financing costs brought about by the opening of the capital market for enterprises, ultimately leading to a decrease in the weighted average cost of capital.
The potential limitations of this paper include the holistic treatment of all listed companies as a collective research sample during the investigation into the impact of capital market opening on the cost of enterprise financing. This approach overlooks the heterogeneity in the economic development status of the locations where these companies operate, which might be a crucial aspect for further exploration in future studies. Additionally, while the paper delves into the effects of China's capital market opening on the financing costs of domestic enterprises, it neglects the examination of how the development trends of major global economies unfold in tandem with China's capital market opening. In other words, the study fails to explore the externalities of China's capital market opening on the world economy, presenting another potential avenue for future research in this paper.

Key words: capital market openness, market efficiency, cost of debt capital, cost of equity capital, weighted average cost of capital