Stock Market Liberalization and Stock Tail Systemic Risk : Evidence from China's “Mainland-Hong Kong Connect” Program

Stock market liberalization, as an integral part of the financial opening, is a critical measure for China to promote economic market-oriented and open-oriented reforms, whose prerequisite is effective risk prevention and control. Considering the “Mainland-Hong Kong Stock Connect” program as a quasi-natural experiment, this paper investigates the influence mechanism of this stock market liberalization policy on stock tail systemic risk based on the time-varying difference-in-differences (DID) model. The results show that: (1) The “Mainland-Hong Kong Stock Connect” program significantly reduces the stock tail systemic risk in both Shanghai and Shenzhen stock markets. (2) The path to reducing risk lies in the improvement of information transparency, corporate governance, and stock liquidity. (3) The risk mitigation effect of this policy is particularly pronounced in areas with weaker investor protection