Research on the Impact of Shadow Banking Activities of Non-Financial Enterprises on Stock Market Volatility: -- Evidence from China's A - share Listed Companies

Yitong Wang

doi:10.54097/h0whdb05

Authors

Yitong Wang

DOI:

https://doi.org/10.54097/h0whdb05

Keywords:

Non-financial Listed Companies, Shadow Banking, Stock Price Volatility

Abstract

In the current context of financialization, non-financial listed companies are increasingly engaging in shadow banking activities, both as actual credit intermediaries and by indirectly participating in shadow credit markets. Shadow banking activities may not only have a significant impact on the stock prices of non-financial listed companies, but more importantly, they exert profound effects on the volatility and overall risk of the entire A-share market. This paper conducts an empirical examination using non-financial listed companies on China's A-share market from 2011 to 2020 as the research sample. The results show that non-financial listed companies engaged in shadow banking activities experience increased stock price volatility, which is detrimental to the stability of the A-share market. Group regression analysis reveals that this impact is particularly significant in companies with a higher degree of shadow banking activity, whereas the effect on stock price volatility is weaker in companies with lower levels of shadow banking involvement. Further mediation analysis indicates that the profit margin of a company's core business plays a mediating role in the relationship between shadow banking activities and stock price volatility. The shadow banking activities of non-financial enterprises negatively affect their core business profitability, which in turn exacerbates the volatility of their stock prices. Lastly, this paper conducts robustness tests using instrumental variable methods and alternative variables, and the results support the preliminary findings. These findings provide new insights into the shadow banking behavior of non-financial listed companies and its potential impact on stock market volatility, offering empirical evidence for regulatory policy formulation.

Downloads

Download data is not yet available.

References

[1] Liu, Shuntong, Yang, Boyu, Wang, Chenghao, et al. "Macroeconomic Conditions and Corporate Capital Structure: Empirical Evidence from Chinese Listed Companies." Management Review, 2023, 35(10): 22-32.

[2] Li, Xianghua, Yao, Ling, Li, Shihui. "The Network Position of Independent Directors and Shadow Banking of Real Enterprises." Financial Development Research, 2022, (07): 3-14.

[3] McCulley, P.A. "Teton Reflections." PIMCO Global Central Bank Focus, 2007.

[4] Adrian, T., Ashcraft, A., Boesky, H., et al. Shadow Banking. Association d'économie financière, 2012.

[5] Kodres, L.E. "What is Shadow Banking?" Finance & Development, 2013, 50(2): 42-43.

[6] Bengtsson, E. "Shadow Banking and Financial Stability: European Money Market Funds in the Global Financial Crisis." Social Science Electronic Publishing, 2013, 32(1): 579-594.

[7] Xiang, Houjun, Zhou, Xiong. "Shadow Banking from the Perspective of Liquidity Hoarding and Its Regulation." Economic Research Journal, 2022, 57(03): 100-117.

[8] Xu, Shaoqiang, Yan, Yongjia. "Development of China’s Shadow Banking System, Interest Rate Transmission, and Monetary Policy Control." International Financial Research, 2015, (11): 58-68.

[9] He, Ping, Liu, Zehao, Fang, Zhiwei. "Shadow Banking, Liquidity, and Social Financing Scale." China Economic Quarterly, 2018, (1): 45-72.

[10] Wang, Yongqin, Liu, Zihan, Li, Chang, et al. "Identifying Shadow Banking Activities of Chinese Non-Financial Enterprises—Evidence from Consolidated Balance Sheets." Management World, 2015, (12): 24-40.

[11] Wang, Jinbin, Li, Bo. "Does China’s Monetary Policy Affect the Risk-Taking Behavior of Commercial Banks?--Evidence from the Dynamic Panel Data of Chinese Commercial Banks." In: China Renmin University Institute of International Monetary Studies. Collected Papers of the International Monetary Review, 2017: 18.

[12] Serletis, A., Xu, L. "The Demand for Banking and Shadow Banking Services." The North American Journal of Economics and Finance, 2019, 47: 132-146.

[13] Deng, Yongliang, Zhang, Hua. "Shadow Banking Development and Corporate Innovation Investment—An Empirical Study from China’s Manufacturing Listed Companies." Research on Economics and Management, 2022, 43(08): 108-128.

[14] Wang, Yao, Huang, Xianhuan. "Digital Finance Development and Shadow Banking of Non-Financial Enterprises." Commercial Research, 2023, (05): 142-152.

[15] Han, Xun, Tian, Guangning, Li, Jianjun. "Shadow Banking and Financing Structure of Non-Financial Enterprises—Empirical Evidence from Chinese Listed Companies." International Financial Research, 2017, (10): 44-54.

[16] Wu, Anbing, Gong, Xingyu, Chen, Chuanglian, et al. "The Risk-Taking Effects of Shadow Banking in Non-Financial Enterprises: Internal Mechanisms and Empirical Evidence." China Industrial Economics, 2023, (04): 174-192.

[17] Liu, Lin, Wang, Jinfeng. "Social Capital and Shadow Banking of Non-Financial Enterprises." Journal of Nanjing Audit University, 2022, 19(02): 80-90.

[18] Li, Jianjun, Han, Xun. "Shadow Banking of Non-Financial Enterprises and Operating Risks." Economic Research Journal, 2019, 54(08): 21-35.

[19] Baum, C.F., Caglayan, M., Stephan, A., Talavera, O. "Uncertainty Determinants of Corporate Liquidity." Economic Modelling, 2008, 25(5): 833-849.

[20] Gorton, G., Lewellen, S., Metrick, A. "The Safe-Asset Share." Social Science Electronic Publishing, 2012, 102(3): 101-106.

[21] Bessembinder, H. "Forward Contracts and Firm Value: Investment Incentive and Contracting Effects." Journal of Financial and Quantitative Analysis, 1991, 26(4): 519-532.

[22] Monahan, "The Information Content of Losses." Journal of Accounting and Economics, Vol. 20, pp. 125-153.

[23] Zhang, Qianyu, Wang, Guojun. "Do Stock Buybacks Suppress Stock Price Volatility?" Modern Economic Research, 2023, (12): 52-66.

[24] Xin, Qingquan, Kong, Dongmin, Hao, Ying. "Corporate Transparency and Stock Price Volatility." Journal of Financial Research, 2014, (10): 193-206.

[25] Sun, Li, Zhu, Yanliang. "Dynamic Impact of Monetary Policy on Stock Price Volatility." Statistics and Decision, 2021, 37(18): 132-136.

[26] Gong, Rukai. "Information Asymmetry, Overconfidence, and Stock Price Movements." Journal of Financial Research, 2021, (06): 152-169.

[27] Cheng, Fei, Zhang, Qingjun. "Controlling Shareholders’ Equity Pledging, Stock Buybacks, and Stock Price Volatility." Southern Finance, 2018, (11): 49-58.

[28] Jiang, G., Lee, C.M.C., Yue, H. "Tunneling through Inter-corporate Loans: The China Experience." Journal of Financial Economics, 2010, Vol. 98(1), pp. 1-20.

[29] Zhao, Lingdi, Wang, Xiaofei, Xu, Le. "Does Corporate Green Investment Reduce Stock Price Volatility?" China Population, Resources and Environment, 2022, 32(02): 85-95.

[30] Chen, Qian, Zhang, Hui. "Systemic Risk Shocks, Corporate Innovation Capacity, and Stock Price Volatility: Theory and Evidence." Chinese Journal of Management Science, 2021, 29(03): 1-13.

[31] Li, Zhisheng, Jin, Ling. "State Intervention, Stock Price Volatility, and Heterogeneous Risk." Journal of Management Science in China, 2019, 22(09): 67-81.

[32] Wen, Zhonglin, Zhang, Lei, Hou, Jietai, et al. "Testing Procedures of Mediation Effect and Their Application." Acta Psychologica Sinica, 2004, (05): 614-620.

[33] Faccio, M., Masulis, R.W., McConnell, J.J. "Political Connections and Corporate Bailouts." Journal of Finance, 2006, 61(6): 2597-2635.

[34] Wei, Longfei, Liu, Lu, Zhu, Yancui. "The Impact of Insurance Holdings on Stock Price Volatility of Listed Companies: Based on the Perspective of Institutional Investor Heterogeneity." Theory and Practice of Finance and Economics, 2021, 42(01): 55-61.