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The real effect of shadow banking regulation: Evidence from China

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  • Jiang, Bo

Abstract

I find a crackdown on shadow banking has real effects. For identification, I exploit a policy — the “New Regulations on Asset Management” (NRAM) — that restricts the issuance of wealth management products (WMP) in China. I show firms with high WMP exposure experience a decline in investments. The effects are pronounced for firms that are more profitable, have higher revenue growth, and are more financially constrained. Exploration of the possible channels of these effects shows a decline in the credit supply of banks that relied more on WMPs, driven by the fall in their shadow banking activities.

Suggested Citation

  • Jiang, Bo, 2024. "The real effect of shadow banking regulation: Evidence from China," Emerging Markets Review, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:ememar:v:59:y:2024:i:c:s1566014123000924
    DOI: 10.1016/j.ememar.2023.101087
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    More about this item

    Keywords

    Shadow banking; Financial regulation; Corporate investment; Portfolio choice; China;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G3 - Financial Economics - - Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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