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How does the fair competition review system promote cross-regional capital flows: An examination based on an "institution-market" dual empowerment framework

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  • Yubin, Wu
  • Jiachuang, Chen
  • Zhujun, Sun
  • Haiyan, Hu

Abstract

Breaking down local protectionism and market segmentation, and promoting the fair and orderly cross-regional flow of capital are key focal points in building a unified national market. Using a sample of Chinese A-share listed companies from 2012 to 2021, this study employs a difference-in-differences (DID) model to investigate the relationship between the Fair Competition Review System (FCRS) and cross-regional capital flows. The findings indicate that the FCRS significantly enhances both the scale and geographic reach of cross-regional capital flows, as evidenced by increases in the volume and spatial spread of cross-regional mergers and acquisitions (M&As). These results remain robust under parallel trend tests and placebo tests. Mechanism analyses reveal that the system exerts both "institutional effects" and "market effects" which collectively drive cross-regional capital flows—specifically through reductions in government intervention, administrative costs, factor market distortions, and environmental uncertainty. Further analysis shows that the system's impact is more pronounced in state-owned enterprises, industries with low market competition, and regions with stronger policy enforcement. The study provides a feasible pathway for the integration of competition policy and cross-regional capital flows, offering practical insights for leveraging competition policy in cross-regional M&A scenarios.

Suggested Citation

  • Yubin, Wu & Jiachuang, Chen & Zhujun, Sun & Haiyan, Hu, 2025. "How does the fair competition review system promote cross-regional capital flows: An examination based on an "institution-market" dual empowerment framework," Finance Research Letters, Elsevier, vol. 86(PB).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pb:s1544612325017416
    DOI: 10.1016/j.frl.2025.108487
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