How does capital market liberalization shape corporate shadow banking? Evidence from China

Deng-Kui Si and Guanchun Liu

China Economic Review, 2025, vol. 93, issue C

Abstract: This paper examines how capital market liberalization shapes corporate shadow banking, utilizing panel data for China's non-financial listed firms. We find the liberalization reform of capital market significantly inhibits corporate shadow banking through the channels of alleviating financing constraints, improving capital allocation efficiency, and enhancing credit allocation quality. The inhibitory effect is more evident for firms experiencing severe financing constraints, larger financing gaps, higher external financing dependence, and fewer investment opportunities. This paper explores the micro-level mechanisms through which macro institutional reforms affect firms' behavior.

Keywords: Capital market liberalization; Shadow banking; Financing constraint; Capital allocation efficiency; Credit allocation quality (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:93:y:2025:i:c:s1043951x25001427

DOI: 10.1016/j.chieco.2025.102484

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