The Impact of Financing Constraints on the Shadow Banking of Non-Financial Firms

Abstract

According to China's Financial Stability Report, since 2020, instability and uncertainty at both domestic and international levels have risen significantly. While financial risks are multifaceted, regional financial risks remain hidden, the risk of default on some enterprises' debts has increased, and the risks of individual small and medium-sized banks are more prominent. In the face of risks, China clearly pointed out that financial security is an important part of economic security. While promoting economic and social development, China should maintain the continuity, stability, and sustainability of macro financial policies, prevent financial risks, and deepen the reform of financial institutions. Currently, some non-financial enterprises in China are engaged in shadow banking through direct or indirect means. However, shadow banking has the characteristics of hidden risks and cross-market risk contagion, which can induce risks in the process of development and threaten the stability of the financial system and financial security. Therefore, further research on shadow banking is needed. Using a sample of A-share non-financial listed companies in China from 2010-2021, this paper conducted a fixed-effects regression on panel data to empirically investigate the regional heterogeneity of financing constraints on the shadow banking of non-financial enterprises and the heterogeneity of the nature of corporate ownership, and obtained the following conclusions. a) financing constraints will enhance the scale of shadow banking of non-financial enterprises. b) there is regional heterogeneity concerning the influence of financing constraints on the shadow banking of non-financial enterprises. c) there is heterogeneity in the nature of ownership for financing constraints.