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Does financial infrastructure upgrading improve firm product market performance? Evidence from the construction of China's unified commercial paper market

Author

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  • Li, Lu
  • Liu, Xuena
  • Li, Dongdong

Abstract

A sound financial infrastructure is the core institutional safeguard for the financial market to effectively serve the real economy. Using the establishment of the Shanghai Commercial Paper Exchange (SHCPE) in 2016 as a quasi-natural experiment, this paper investigates whether and how the modernization of market plumbing improves firm product market performance. We find that the establishment of the SHCPE significantly enhances the product market performance of firms with higher bill dependence, reflected in a substantial increase in their industry-adjusted sales growth rate. Mechanism analysis reveals a strategic response framework encompassing three distinct channels: (1) a differentiation strategy driven by technological innovation; (2) a cost leadership strategy facilitated by capacity expansion and cost optimization; and (3) a relational strategy strengthened by supply chain bonding. Heterogeneity analysis further shows that these effects are more pronounced for firms with severe financing constraints, high customer concentration, and in competitive industries. This paper not only enriches the literature on the real effects of financial infrastructure but also provides micro-level evidence on how centralized and digitalized clearing systems empower corporate competitiveness, offering valuable insights for global financial modernization.

Suggested Citation

  • Li, Lu & Liu, Xuena & Li, Dongdong, 2026. "Does financial infrastructure upgrading improve firm product market performance? Evidence from the construction of China's unified commercial paper market," Pacific-Basin Finance Journal, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:pacfin:v:98:y:2026:i:c:s0927538x26001265
    DOI: 10.1016/j.pacfin.2026.103180
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    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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