The healthy development of multi-tiered capital market is conducive to the capital market better serving the real economy. At present, the core problem of China’s multi-tiered capital market is no longer whether to establish the multi-tiered capital market and which tier to establish, but to explore the cost and benefit factors that affect the tier division and structure design, as well as factors that drive the tier change, and carry out corresponding welfare analysis. Exploring the logic of institutional change in China’s multi-tiered capital market is helpful to summarize these factors. The paper holds that the tiers of capital market should be divided according to the listing standard, while different tiers of capital market should be viewed as different institutional arrangements, and the construction process of China’s multi-tiered capital market is an institutional change process led by the government as a whole. On this basis, using the institutional change theory, the paper provides the supply-side reasons and demand-side reasons why we should establish the capital market, why we should establish the capital market from the main board market, and why the capital market evolves from high-tier to low-tier. The results show that: (1) the demand side motivation for the establishment of capital market in China is the imbalance of the original financial system caused by the rapid economic growth after the reform and opening-up, while the supply side motivations include the liberation of the understanding of stocks and the stock market, the accumulation of knowledge about securities and the security market, and the development of computer technology and network communication technology resulting in a set of alternative low-cost institutional arrangements; (2) the establishment of capital market from the main board cannot only effectively meet the financing demand by solving the difficulties and relieving the financial pressure of large state-owned enterprises at that time, but also meet the stronger trading demand caused by the more obvious characteristics of “capital integration” of large enterprises, and also meet the risk avoidance demand of regulatory subjects caused by the lack of a deep understanding of stocks and the stock market; (3) the demand side motivations of the multi-tiered capital market constructed from high tier market to low tier market include the deepening understanding of the operation law of capital market, the rapid development of private economy with small and medium-sized enterprises as the main body, and the requirements of improving the ability of independent innovation and building an innovation-oriented country. The supply side motivations include rich experience in capital market development and supervision as well as the development of science and technology which reduces the cost of supervision. The human capital related to stocks and stock market is increasingly abundant, which reduces the human cost of each participant. The enrichment of regulatory forces and rich regulatory experience have reduced the risk avoidance degree of regulatory subjects. The research in this paper shows that the reform and development of China’s multi-tiered capital market in the dimension of tier conforms to the logic of institutional change, but there are still some theoretical and practical problems worth exploring deeply. In theory, it is necessary to further investigate the institutional change of other dimensions in the multi-tiered capital market except the tier dimension, to further explore the dynamic mechanism affecting the tier change, and to further analyze the universality of the influencing factors summarized in this paper. In practice, it is necessary to investigate the new design logic of China’s multi-tiered capital market under the background of key words such as digitization, common prosperity, double cycle, carbon peaking and carbon neutralization, and improving the function of capital market.