The real effect of shadow banking regulation: Evidence from China

Bo Jiang

Emerging Markets Review, 2024, vol. 59, issue C

Abstract: I find a crackdown on shadow banking has real effects. For identification, I exploit a policy — the “New Regulations on Asset Management” (NRAM) — that restricts the issuance of wealth management products (WMP) in China. I show firms with high WMP exposure experience a decline in investments. The effects are pronounced for firms that are more profitable, have higher revenue growth, and are more financially constrained. Exploration of the possible channels of these effects shows a decline in the credit supply of banks that relied more on WMPs, driven by the fall in their shadow banking activities.

Keywords: Shadow banking; Financial regulation; Corporate investment; Portfolio choice; China (search for similar items in EconPapers)
JEL-codes: G23 G28 G3 O17 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:59:y:2024:i:c:s1566014123000924

DOI: 10.1016/j.ememar.2023.101087

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