IDEAS home Printed from https://ideas.repec.org/a/bla/ausecp/v61y2022i1p24-41.html
   My bibliography  Save this article

Financial innovation regulations and firm performance: Evidence from Chinese listed firms

Author

Listed:
  • Minhua Yang

Abstract

This study investigates the impacts of financial innovation regulations on Chinese listed firms in the period of 2008 to 2020, which comes to the theoretical contribution of this paper. These regulations introduced in 2016 mainly focus on the peer‐to‐peer (P2P) lending platforms in this country and tend to be negatively associated with firm performance, especially for those firms investing in the P2P lending platforms, as a large amount of P2P lending platforms with unfavourable performance disappear in recent years, which may end up negatively affecting those firms investing in them. Survived P2P lending platforms tend to be stronger, then become a type of substitute of traditional banks and are able to carve up the market share of bank. The latter therefore has to increase credit supply to maximise profits, which leads to the access to more credits and therefore worse firm performance, especially for those firms with financial constraints in terms of the cash–cash flow sensitivity. The empirical results are robust to the potential endogeneity issue of financial constraints. Larger firms and state‐owned enterprises (SOEs) tend to have better performance, implying that authorities may take actions for smaller firms (non‐SOEs) to offset the negative impacts of financial innovation regulations they suffer and achieve better implementation of financial innovation regulations, which comes to the practical contribution of this paper.

Suggested Citation

  • Minhua Yang, 2022. "Financial innovation regulations and firm performance: Evidence from Chinese listed firms," Australian Economic Papers, Wiley Blackwell, vol. 61(1), pages 24-41, March.
  • Handle: RePEc:bla:ausecp:v:61:y:2022:i:1:p:24-41
    DOI: 10.1111/1467-8454.12231
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1467-8454.12231
    Download Restriction: no

    File URL: https://libkey.io/10.1111/1467-8454.12231?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Isil Erel & Yeejin Jang & Michael S. Weisbach, 2015. "Do Acquisitions Relieve Target Firms’ Financial Constraints?," Journal of Finance, American Finance Association, vol. 70(1), pages 289-328, February.
    2. Udichibarna Bose & Ronald McDonald & Serafeim Tsoukas, 2016. "Policy initiatives and Örmsíaccess to external finance: Evidence from a panel of emerging Asian economies," Working Papers 2016_18, Business School - Economics, University of Glasgow.
    3. Kai Lisa Lo & Jackson Jinhong Mi & Minhua Yang & Shuyu Zhang, 2020. "Do financial regulations have impacts on ownership structure of P2P firms?," Applied Economics Letters, Taylor & Francis Journals, vol. 27(14), pages 1156-1159, July.
    4. Yang, Minhua & He, Yu, 2019. "How does the stock market react to financial innovation regulations?," Finance Research Letters, Elsevier, vol. 30(C), pages 259-265.
    5. Sanjiv R. Das, 2019. "The future of fintech," Financial Management, Financial Management Association International, vol. 48(4), pages 981-1007, December.
    6. Lin, Huidan, 2011. "Foreign bank entry and firms' access to bank credit: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 1000-1010, April.
    7. Silber, William L, 1983. "The Process of Financial Innovation," American Economic Review, American Economic Association, vol. 73(2), pages 89-95, May.
    8. Gaganis, Chrysovalantis & Pasiouras, Fotios, 2013. "Financial supervision regimes and bank efficiency: International evidence," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5463-5475.
    9. Merton, Robert C., 1995. "Financial innovation and the management and regulation of financial institutions," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 461-481, June.
    10. Robert C. Merton, 1995. "A Functional Perspective of Financial Intermediation," Financial Management, Financial Management Association, vol. 24(2), Summer.
    11. repec:bla:jfinan:v:59:y:2004:i:4:p:1777-1804 is not listed on IDEAS
    12. Miller, Merton H., 1986. "Financial Innovation: The Last Twenty Years and the Next," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(4), pages 459-471, December.
    13. Beck, Thorsten & Chen, Tao & Lin, Chen & Song, Frank M., 2016. "Financial innovation: The bright and the dark sides," Journal of Banking & Finance, Elsevier, vol. 72(C), pages 28-51.
    14. David J. Denis & Valeriy Sibilkov, 2010. "Financial Constraints, Investment, and the Value of Cash Holdings," The Review of Financial Studies, Society for Financial Studies, vol. 23(1), pages 247-269, January.
    15. Zan Zhang & Ken Hung & Tsangyao Chang, 2017. "P2P Loans and bank loans, the chicken and the egg, what causes what?: further evidence from a bootstrap panel granger causality test," Applied Economics Letters, Taylor & Francis Journals, vol. 24(19), pages 1358-1362, November.
    16. Cornett, Marcia Millon & McNutt, Jamie John & Strahan, Philip E. & Tehranian, Hassan, 2011. "Liquidity risk management and credit supply in the financial crisis," Journal of Financial Economics, Elsevier, vol. 101(2), pages 297-312, August.
    17. Robyn McLaughlin & Assem Safieddine, 2008. "Regulation and information asymmetry," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 16(1), pages 59-76, February.
    18. Pankaj Kumar Maskara & Emre Kuvvet & Gengxuan Chen, 2021. "The role of P2P platforms in enhancing financial inclusion in the United States: An analysis of peer‐to‐peer lending across the rural–urban divide," Financial Management, Financial Management Association International, vol. 50(3), pages 747-774, September.
    19. Randall Dodd, 2000. "The Role of Derivatives in the East Asian Financial Crisis," SCEPA working paper series. 2000-19, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    20. Wieneke, Axel & Gries, Thomas, 2011. "SME performance in transition economies: The financial regulation and firm-level corruption nexus," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 221-229, June.
    21. G.M. Constantinides & M. Harris & R. M. Stulz (ed.), 2003. "Handbook of the Economics of Finance," Handbook of the Economics of Finance, Elsevier, edition 1, volume 1, number 1.
    22. Brooks, Robert D & Faff, Robert W, 1997. "Financial Deregulation and Relative Risk of Australian Industry," Australian Economic Papers, Wiley Blackwell, vol. 36(69), pages 308-320, December.
    23. Buck, Florian & Schliephake, Eva, 2013. "The regulator’s trade-off: Bank supervision vs. minimum capital," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4584-4598.
    24. Meng, Qingbin & Li, Xinyu & Chan, Kam C. & Gao, Shenghao, 2020. "Does short selling affect a firm's financial constraints?," Journal of Corporate Finance, Elsevier, vol. 60(C).
    25. G.M. Constantinides & M. Harris & R. M. Stulz (ed.), 2003. "Handbook of the Economics of Finance," Handbook of the Economics of Finance, Elsevier, edition 1, volume 1, number 2.
    26. Kim, Teakdong & Koo, Bonwoo & Park, Minsoo, 2013. "Role of financial regulation and innovation in the financial crisis," Journal of Financial Stability, Elsevier, vol. 9(4), pages 662-672.
    27. Valentine, Tom, 1997. "Regulation of Bank Interest Rate Risk," Australian Economic Papers, Wiley Blackwell, vol. 36(68), pages 31-41, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tamer Khraisha & Keren Arthur, 2018. "Can we have a general theory of financial innovation processes? A conceptual review," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 4(1), pages 1-27, December.
    2. Heikki Marjosola, 2021. "The problem of regulatory arbitrage: A transaction cost economics perspective," Regulation & Governance, John Wiley & Sons, vol. 15(2), pages 388-407, April.
    3. Hasan Cömert & Gerald Epstein, 2016. "Finansal Yenilik Yazinindaki Son Gelismeler," STPS Working Papers 1604, STPS - Science and Technology Policy Studies Center, Middle East Technical University, revised Jan 2016.
    4. An, Hui & Yang, Ruibo & Ma, Xuejiao & Zhang, Siqi & Islam, Sardar M.N., 2021. "An evolutionary game theory model for the inter-relationships between financial regulation and financial innovation," The North American Journal of Economics and Finance, Elsevier, vol. 55(C).
    5. Yang, Minhua & He, Yu, 2019. "How does the stock market react to financial innovation regulations?," Finance Research Letters, Elsevier, vol. 30(C), pages 259-265.
    6. Bernier, Maxence & Plouffe, Michael, 2019. "Financial innovation, economic growth, and the consequences of macroprudential policies," Research in Economics, Elsevier, vol. 73(2), pages 162-173.
    7. Joanna Błach, 2020. "Barriers to Financial Innovation—Corporate Finance Perspective," JRFM, MDPI, vol. 13(11), pages 1-23, November.
    8. Thomas Philippon, 2015. "Has the US Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation," American Economic Review, American Economic Association, vol. 105(4), pages 1408-1438, April.
    9. Laeven, Luc & Levine, Ross & Michalopoulos, Stelios, 2015. "Financial innovation and endogenous growth," Journal of Financial Intermediation, Elsevier, vol. 24(1), pages 1-24.
    10. Bilbiie, Florin O. & Straub, Roland, 2012. "Changes in the output Euler equation and asset markets participation," Journal of Economic Dynamics and Control, Elsevier, vol. 36(11), pages 1659-1672.
    11. Ivan Diaz-Rainey & John Ashton & Maz Yap & Murat Genc & Rosalind Whiting, 2015. "The determinants of regulatory responses to risks from financial innovation: Survey evidence from G20," Working Papers 15001, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    12. Helios Herrera & Enrique Schroth, 2005. "Developer's Expertise and the Dynamics of Financial Innovation: Theory and Evidence," Levine's Bibliography 784828000000000290, UCLA Department of Economics.
    13. Korkut Alp Erturk, 2019. "Intrinsic Moral Hazard," Working Paper Series, Department of Economics, University of Utah 2019_03, University of Utah, Department of Economics.
    14. W. Scott Frame & Lawrence J. White, 2009. "Technological change, financial innovation, and diffusion in banking," FRB Atlanta Working Paper 2009-10, Federal Reserve Bank of Atlanta.
    15. Awrey, Dan, 2013. "Toward a supply-side theory of financial innovation," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 401-419.
    16. Jianxing Wei & Tong Xu, 2018. "A Model of Bank Credit Cycles," 2018 Meeting Papers 610, Society for Economic Dynamics.
    17. Folorunsho M. Ajide, 2016. "Financial Innovation and Sustainable Development in Selected Countries in West Africa," Journal of Entrepreneurship, Management and Innovation, Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione", vol. 12(3), pages 85-111.
    18. Adrian Van Rixtel & Luna Romo González & Jing Yang, 2015. "The determinants of long-term debt issuance by European banks: evidence of two crises," BIS Working Papers 513, Bank for International Settlements.
    19. Lorenzo Sasso, 2016. "Bank Capital Structure and Financial Innovation: Antagonists or Two Sides of the Same Coin?," Journal of Financial Regulation, Oxford University Press, vol. 2(2), pages 225-263.
    20. W. Scott Frame & Larry Wall & Lawrence J. White, 2018. "Technological Change and Financial Innovation in Banking: Some Implications for FinTech," Working Papers 18-28, New York University, Leonard N. Stern School of Business, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ausecp:v:61:y:2022:i:1:p:24-41. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0004-900X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.