Table 12 Variable definitions
Variable type | Variable name | Variable | Variable definitions |
|---|---|---|---|
Dependent variable | Market efficiency | DailySprd1 | Annual average of intraday bid-ask spreads calculated by solving the simultaneous equations using daily high prices and daily low prices on two consecutive trading days. The higher the bid-ask spread, the lower the market efficiency. We use the reversed number to proxy for market efficiency |
DailySprd2 | Annual average of intraday bid-ask spreads calculated by dividing the difference between the daily high price and the daily low price with their average. The higher the bid-ask spread, the lower the market efficiency. We use the reversed number to proxy for market efficiency | ||
Independent variable | Stock market liberalization | HSSC | Based on prior literature (Henry 2000a, b; Fan and Wang 2017), HSSC is defined as a dummy variable. If the listed firm is eligible for trading under either the SH-HK or SZ-HK Stock Connect scheme, HSSC equals 1 and equals 0 otherwise. The Stock Connect schemes represent recent stock market liberalization toward more openness and transparency in China |
Control Variable | Firm Size | Size | Natural logarithm of total assets at year-end |
Leverage | Lev | Total liabilities/Total assets | |
Return on Assets | ROA | Net operating income divided by total assets | |
Cash flow volatility | Cash_vol | The standard deviation of cash flows in the last three years | |
Firm Loss | Loss | Dummy variable, equals 1 when the firm’s net profit is negative in the year and equals 0 otherwise | |
Years listed | Age | Natural logarithm of the number of years the firm is listed | |
Audit Opinion | Opinion | Dummy variable, equals 1 if auditor's opinion for the year t shows standard “unqualified opinion” and equals 0 otherwise | |
Analyst Following | Analyst | Natural logarithm of the number of financial analysts who cover a listed firm in a given year | |
Turnover | Turnover | Turnover ratio, computed as daily number of shares traded/total number of tradable shares | |
Year | Year | Year fixed effects, matrix of dummies that’s one for the year from January 1 to December 31 and zero otherwise | |
Industry | Industry | Industry fixed effects. China Securities Regulation Commission modified the industry classification in 2012. To ensure comparability, we use the new classification and manually adjusted the industry classifications of listed firms before 2012 |