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Shadow banking contraction and total factor productivity of enterprises

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  • Bai, Jun
  • Liu, Ying

Abstract

Stringent financial regulations facilitate high-quality development of enterprises by curbing shadow banking activities. Using 2013–2021 A-share listed companies as our sample, we employ a difference-in-differences model centered on the New Regulations on Asset Management. Results demonstrate that reduced shadow banking activities significantly improve firms' total factor productivity (TFP). This finding remains robust across multiple tests, indicating that diminished risk of shadow banking redirects capital toward productive uses, thereby enhancing TFP. Mechanism analysis reveals three drivers of TFP growth: improved core business efficiency, increased innovation investment, and enhanced information governance. The effect is more pronounced in non-state-owned enterprises and firms with lower ICQ (Internal Control Quality), lower proportion of institutional investor holdings, or poor information disclosure. This study not only evaluates the New Regulations on Asset Management but also demonstrates how financial supply-side reforms reshape corporate resource allocation. It highlights the policy's effectiveness in redirecting firms from speculative pursuits toward substantive economic activities.

Suggested Citation

  • Bai, Jun & Liu, Ying, 2025. "Shadow banking contraction and total factor productivity of enterprises," Finance Research Letters, Elsevier, vol. 86(PE).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pe:s1544612325019567
    DOI: 10.1016/j.frl.2025.108702
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    References listed on IDEAS

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