Stock Market Liberalization, Foreign Investors, and Firm Labor Investment: Evidence From China

Analyzing the Shanghai‐Hong Kong and Shenzhen‐Hong Kong Stock Connect (SHSZ‐HK Connect) programs as quasi‐natural experiments, our study reveals that stock market liberalization increases labor investment efficiency. The effect is more pronounced in firms with higher foreign ownership, as liberalization enhances their information environment and reduces capital costs. However, the impact is weaker in regions with higher minimum wages, highlighting the importance of labor market conditions in shaping outcomes. Additionally, firms exposed to liberalization promote labor investment efficiency through human capital upgrading by recruiting high‐skilled workers and enhancing employee training to improve labor productivity.