Doctor of Philosophy (PhD)


Political Science

Document Type



The Chinese stock market crash of 2015 attracted much attention from both the media and academia. Yet it was not a unique incident. The Chinese stock market fluctuates more frequently and drastically than most mature stock markets. The purpose of this work is to explain these unusual stock market fluctuations through a political lens. Traditional financial models and behavioral finance cannot sufficiently explain the unusual fluctuations of the Chinese stock market. Traditional financial models find that economic forces cannot explain all fluctuations in China’s stock market. Behavioral finance attributes the fluctuations to investor’s irrational behavior without explaining why investors behave more irrationally than other investors. Other explanations, like financial knowledge and the immature market arguments cannot sufficiently explain the fluctuations of Chinese financial markets. A common characteristic of previous literature is a lack of real political explanations. This work develops a political explanation of the Chinese stock market, with an emphasis on biased financial institutions. Biased financial institution are the result of state-owned enterprises’ interest and political influence, and cause behavioral changes in investors and the market environment. Drastic market fluctuations serve as a channel for market forces to input their interests into political system. In reaction to these unusual market fluctuations, the Chinese government adjusts institutions to make concessions to private capital and to stabilize the market. Market fluctuations are the key force behind the Chinese government’s institutional development. Three case studies will illustrate this theory: non-tradable share reform, circuit-breaker institution, and the international board. These cases demonstrate how Chinese institutional design conforms to the interest of state-owned enterprises, introduces bias, and shows how the government uses the reform process to make concessions.



Committee Chair

Ray, Leonard