LI Jianjun;HAN Xun
School of Finance, Central University of Finance and Economics;School of Economics, Beijing International Studies University
With China’s economy entering the new normal, problems such as high leverage rate, chaotic financial investment, and the shift from investment, production and circulation in the real economy to investment in the virtual economy have been highlighted. More and more non-financial enterprises have begun to develop shadow banking business and have become important shadow banking intermediaries. Shadow banking is characterized by high leverage, high risk and asymmetric information. However, non-financial enterprises’ ability to identify and deal with financial risks is weak. Therefore, exploring the business model of non-financial enterprises’ shadow banking and its impact on their business risk is significant both theoretically and practically for preventing systemic financial risk, restraining the trend of industry hollowing-out and promoting the stable development of real economy. Most existing literature focuses on the shadow banking activities of financial institutions, and explores the connotation of shadow banking, its scale measurement methods and its economic effect on monetary policy, financial stability and output growth. With the gradual enhancement in the trend of economic financialization, enterprise departments have begun to carry out shadow banking activities through entrustment, equity innovation and bridge lending, and non-financial enterprises’ shadow banking tendency is strengthening (Han et al., 2017). Although there are abundant research on shadow banking system and enterprises’ financialization, few studies focus on non-financial enterprises’ shadow banking business. Some studies investigate the identification, business mechanism and social welfare losses of non-financial enterprises’ shadow banking activities, but studies on the impact of non-financial enterprises’ shadow banking business on their operating risk are very limited. This paper intended to fill this gap from both theoretical and empirical perspectives. It used data of non-financial listed companies in Shanghai and Shenzhen stock exchanges from 2004 to 2015 to test the impact of non-financial enterprises’ shadow banking activities on their operating risk and the heterogeneity of this impact with different degrees of financing constraints and corporate governance. It also explored the transmission mechanism of non-financial enterprises’ shadow banking on operating risk within different business models. Finally, this paper put forward policy suggestions for restraining the over-financialization of non-financial enterprises, reducing systemic risks and preventing the shift from investment, production and circulation in the real economy to investment in the virtual economy. There are three major findings. First, engaging in shadow banking activities increases enterprises’ operating risk, and this positive effect is more significant in the enterprises with tighter financial constraints and poorer corporate governance. Second, when enterprises engage in shadow banking activities through entrusted loans or private lending, in which case they provide funds as credit intermediaries, the borrowers’ repayment risk reduces the short-term solvency of lending enterprises through the accounting account mechanism, and thereby increases their operating risk. Third, if non-financial enterprises indirectly participate in the shadow credit chain through purchasing quasi-financial products issued by financial institutions, the volatility of financial system transmits to non-financial enterprises through systemic risk linkage, increases the volatility of their expected returns and aggravates their operating risk. Policy suggestions are as follows. First, unbalanced and inefficient allocation of funds caused by bank credit discrimination should be eliminated, and direct financing capital market should be developed to provide small-and-medium enterprises with equal and extensive access to financial services and ultimately curb the excessive shadow banking behavior of non-financial enterprises. Second, financial functional supervision should be strengthened and the transparency of financial statements of listed companies should be enhanced to avoid the risk accumulation caused by non-compliance channels such as underground financing. Third, it is necessary to improve entities’ investment environment, speed the clean-up of zombie enterprises, promote the upgrading of industrial structure, encourage enterprises’ innovation behavior and guide the return of enterprises from financial profit-seeking behavior to production and operation activities.
shadow banking;operating risk;transmission mechanism;systemic risk
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