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The effects of reduced availability of shadow banking financing: Evidence from employment

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  • He, Siyi
  • Zeng, Ceng

Abstract

We provide firm-level evidence that reduced availability of shadow banking financing affects firms’ employment decisions. Using China’s 2017 shadow banking regulations as an exogenous shock to constrain the availability of shadow banking, we find that the employment level and the ratio of highly skilled employees in affected firms significantly decrease after the regulations are instituted. The plausible underlying channels are intensification of financial constraints and reduction of R&D investment. The effects are more pronounced for non-state-owned enterprises, labor-intensive firms, and firms in provinces that are more dependent on shadow banking. Furthermore, affected firms strategically adopt outsourcing of their human resources, but the firms’ employment changes still harm their financial performance and total factor productivity.

Suggested Citation

  • He, Siyi & Zeng, Ceng, 2026. "The effects of reduced availability of shadow banking financing: Evidence from employment," Journal of Banking & Finance, Elsevier, vol. 183(C).
    • Handle: RePEc:eee:jbfina:v:183:y:2026:i:c:s0378426625002389
    DOI: 10.1016/j.jbankfin.2025.107618
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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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