Financial Regulation,Shadow Banking,and Corporate Long-Term Investment with Short-Term Financing:Empirical Evidence from the New Regulations on Asset Management
The 20th National Congress of the Communist Party of China emphasized the importance of"strengthening the financial stability safeguard system,bringing all types of financial activities under regulation by law,and guarding against systemic risks."Long-term investment with short-term financing(LTISF)is a prevalent issue of financing term mismatch among enterprises in China and other developing countries,posing a significant systemic risk.Using the new asset management regulation as a quasi-natural experiment,this paper examines the impact of strong financial regulation on LTISF among enterprises.The findings show that after the implementation of the regulation,enterprises highly dependent on shadow banking financing significantly reduced their LTISF practices.This effect varies notably across enterprise,industry,and regional levels and is achieved through the re-duction of short-term debt and an expansion in long-term financing.Further analysis reveals that the regulation mitigates both operational and bankruptcy risks by curbing LTISF behaviors.These results indicate that strong financial regulation effectively ad-dresses the maturity mismatch in enterprise financing,helping to maintain the"no systemic risk"baseline.Building on prior lit-erature that emphasizes a"financial development perspective"in tackling LTISF issues,this study introduces the"financial regu-lation perspective,"broadening and deepening research in this field while offering theoretical and empirical evidence to inform policymaking.
Financial RegulationLong-Term Investment with Short-Term FinancingShadow BankingNew Regulations on Asset Management
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