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Explore of Bank Competition on Non-Financial Enterprises' Financial Capabilities: Shadow Banking as a Moderating Effect

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  • Cui, Jun

Abstract

This study examines how competition in the banking sector affects the financial capabilities of non-financial enterprises in China, with a particular focus on the moderating role of shadow banking's financial innovation. Using panel data from 7,250 firm-year observations of Chinese private banks collected from CNRDS, Wind, and CSMAR databases from 2017 to 2022, we apply a fixed-effects model to investigate this relationship. Our findings indicate that increased banking competition significantly enhances non-financial enterprises' financial capabilities, particularly in terms of financing flexibility and capital allocation efficiency. Moreover, shadow banking's financial innovation positively moderates this relationship, strengthening the positive effect of banking competition on firms' financial capabilities. The results are robust across various alternative specifications and endogeneity tests. This study contributes to the literature on financial market competition, corporate finance, and the evolving role of shadow banking in China's financial ecosystem, providing important implications for policymakers and corporate financial management.

Suggested Citation

  • Cui, Jun, 2025. "Explore of Bank Competition on Non-Financial Enterprises' Financial Capabilities: Shadow Banking as a Moderating Effect," OSF Preprints 7jtwc_v1, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:7jtwc_v1
    DOI: 10.31219/osf.io/7jtwc_v1
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    References listed on IDEAS

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    1. Allen N. Berger & Asli Demirgüč-Kunt & Joseph G. Haubrich & Ross Levine, 2004. "Introduction: Bank concentration and competition: an evolution in the making," Proceedings, Federal Reserve Bank of Cleveland, pages 433-451.
    2. Torsten Ehlers & Steven Kong & Feng Zhu, 2018. "Mapping shadow banking in China: structure and dynamics," BIS Working Papers 701, Bank for International Settlements.
    3. Arnoud W. A. Boot & Anjan V. Thakor, 2000. "Can Relationship Banking Survive Competition?," Journal of Finance, American Finance Association, vol. 55(2), pages 679-713, April.
    4. Jun Cui, 2025. "Entrepreneurial Motivations and ESG Performance Evidence from Automobile Companies Listed on the Chinese Stock Exchange," Papers 2503.21828, arXiv.org.
    5. Kaiji Chen & Jue Ren & Tao Zha, 2018. "The Nexus of Monetary Policy and Shadow Banking in China," American Economic Review, American Economic Association, vol. 108(12), pages 3891-3936, December.
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