The Double-edged Sword Effect Of Non-financial Enterprises’ Shadow Banking Activities Under Financial Openness

Non-financial enterprises undertake the function of material production,are creators of national wealth and value,and are an important guarantee for supporting the high-quality development of China’s economy.The report of the 20 th National Congress of the Communist Party of China emphasized the importance of encouraging and guiding finance to support the real economy.However,since 2010,the downward pressure on the economy caused by the "three-period superposition" has gradually increased,and the structural contradictions in the Chinese economy have become increasingly prominent.The sharp contrast between the high profits of the financial sector and the decline in the profits of real enterprises has led to the coexistence of continuous expansion of financial assets and a slowdown in industrial investment growth.The profit-seeking motive of capital inhibits the willingness of non-financial enterprises to expand industrial investment and reproduction,and drives them to invest in financial assets with higher yields.Profit from financial channels is becoming an important source of corporate income,which further intensifies the momentum of companies turning from real to virtual.In China’s special economic and financial environment,the credit market presents the characteristics of "dual credit".The contradiction between the discriminatory credit supply and the marketization of financing demand continues to intensify.The imbalance in the initial allocation of credit has led to a huge difference in the financing status between state-owned or large enterprises and small and mediumsized private enterprises,which state-owned or large enterprises with "high qualifications" occupy most of the credit funds,while small and medium-sized private enterprises with "low qualifications" face the dilemma of difficult and expensive financing.Under the spontaneous adjustment of the market,the parties with sufficient funds and the parties with insufficient funds have reached a consensus,and the unequal financing status has given rise to the shadow banking behavior of non-financial enterprises.Non-financial enterprises either directly act Openness as quasi-credit intermediaries,engage in inter-enterprise re-lending business,or purchase shadow credit products,and indirectly participate in the shadow banking credit creation chain.According to CSMAR,as of the end of 2019,the shadow banking business participated by non-financial enterprises accounted for 12.81% of their total assets,which is already one of the main channels for enterprise investment.Non-financial enterprises are becoming another major participant in shadow banking in addition to commercial banks,securities,trusts,funds,and other formal financial institutions,small loan companies,financial leasing companies and other quasi financial institutions,and private financial borrowers.On the one hand,the shadow banking business of enterprises redistributes their idle funds to ease the financing constraints of enterprises with capital shortages,and to a certain extent resolves for the structural contradiction between the supply and demand of funds caused by the unbalanced initial distribution of credit by commercial banks.On the other hand,the high leverage ratio of non-financial companies has not stopped the decline in industrial investment,and the degree of shadow banking of enterprises is gradually deepening.The high risk of shadow banking itself poses a threat to the operation and development of enterprises.At the same time,under the background of China’s continuous promotion of financial openness,the improvement of the level of financial openness and the impact of external instability and uncertainty will also have an impact on the behavioral choices of enterprises.This paper focuses on the shadow banking behavior of non-financial companies,inherits previous research in the field of shadow banking,and further improves the research on non-financial companies’ involvement in shadow banking business,clarifies the double-edged sword effect of non-financial enterprises’ shadow banking from the perspective of capital allocation efficiency and risk generation,and expands the research to the background of financial openness to examine how the continuous improvement of financial openness will affect the behavior of enterprises.The research in this paper has both important theoretical significance and practical application value,which not only meets the macropropositions such as giving full play to the decisive role of the market in resource allocation and expanding financial openness proposed in the report of the 20 th National Congress of the Communist Party of China,but also provides policy guidance and useful reference for improving the efficiency of financial resource allocation and boosting high-quality economic development.The research framework of this paper is as follows: First of all,this paper reviews the existing literature and finds that previous studies mainly analyze the definition,influencing factors,operating mechanism and economic impact of shadow banking from the macro and bank levels,while there are few studies focusing on shadow banking from the perspective of enterprises,in addition,there is no empirical evidence on the impact of financial openness on shadow banking.Then this paper sorts out the theory of financial development,financial regulatory arbitrage,financial innovation,financial vulnerability,financial resource allocation and priority financing to provide theoretical support for the follow-up path analysis.Secondly,this paper describes the characteristic facts of the shadow banking of nonfinancial enterprises in China,introduces its causes,and divides the business into two modes: "quasi-credit intermediary" and "shadow credit chain" according to the differences in the ways of participating in shadow banking.Using the data of listed companies from 2007 to 2019 to estimate the scale of shadow banking business of non-financial companies,this paper compares and analyzes the differences in shadow banking business scale among different types of enterprises from the six levels of business model,ownership nature,asset scale,industry,region and degree of marketization.Third,this paper analyzes the transmission path of the economic impact of non-financial enterprises’ shadow banking under the financial openness from the dual perspectives of capital allocation efficiency and risk generation.This paper constructs the investment decision-making model of shadow banking enterprises and other enterprises,and examines the role of shadow banking enterprises’ financial resource reallocation under credit discrimination,and discusses whether the secondary distribution of financial resources is efficient under the influence of information mechanism and supervision mechanism.Then,from the perspective of shadow banking,this paper explains the reasons for the high leverage ratio of enterprises,clarifies how the default risk of shadow banking business will backfire on enterprises,and intensifies enterprises’ risk-taking,and further examines how financial openness has an impact.Fourth,this paper uses empirical models to verify the path analysis ideas.The first is the impact of nonfinancial enterprises’ shadow banking on the efficiency of capital allocation under financial openness.This paper examines whether companies with financing Openness advantages will reallocate their financial resources,compares the impact of credit discrimination from three perspectives: ownership nature,asset scale,and marketization degree differences in the region,and then analyzes whether shadow credit financing improves the efficiency of corporate capital allocation.Taking investment efficiency as the measurement index,this paper divides the samples into over-investment and under-investment samples,explores how shadow credit financing can improve corporate investment efficiency from the perspective of financing constraint mechanism,information mechanism and supervision mechanism,and further analyzes the impact of financial openness from the perspectives of financial openness,RMB exchange rate fluctuations,cross-border investment efficiency,and the Federal Reserve monetary policy.The second is the risk analysis of non-financial enterprises’ shadow banking under the financial openness.This paper empirically tests the relationship between corporate shadow banking and its leverage ratio,uses the intermediary effect model to examine the intermediary role of debt investment efficiency,analyzes the impact of the macroeconomic environment,monetary policy shocks,and deleveraging policies’ implementation.Then this paper discusses whether the default risk of shadow banking business will backfire on the enterprise,analyzes how the shadow banking of enterprises affects their own risk-taking based on the business cross mechanism and risk linkage mechanism,examines the economic consequences of the enterprise’s shadow banking from the perspective of main business losses,and further examines the impact of financial opening on the risk of shadow banking enterprises.Finally,this paper summarizes the research conclusions and puts forward corresponding policy recommendations for the reference of scholars and regulatory authorities.The conclusions of this paper include:(1)Non-financial enterprises’ shadow banking business is mainly based on the "quasi-credit intermediary" model,and its scale is closely related to the economic environment and policies.and there are obvious differences in ownership,assets,industries,regions and marketization degrees.(2)Non-financial enterprises with financing advantages will re-allocate financial resources.The more obvious credit discrimination is,the greater the intensity of financial resources’ reallocation by shadow banking enterprises.The secondary distribution of financial resources alleviates the financing constraints of enterprises and improves enterprises’ insufficient investment under the influence of information mechanism and supervision mechanism.(3)Through the equational relationship of the corporate sector’s leverage ratio,this paper finds that enterprises’ excessive participation in shadow banking business will squeeze out the share of industrial investment,reduce the efficiency of debt investment,thus increase their own leverage ratio.Economic growth,loose monetary policy,and deleveraging policies can reduce this positive effect.(4)This paper finds that the default risk of lending companies intensifies the risk-taking of shadow banking companies through the business cross mechanism,while the financial market risk increases the risktaking through the risk linkage mechanism.Enterprises with excessive risk-taking participate in shadow banking business will increase their main business losses.(5)The spillover effect and competition effect brought about by the expansion of financial openness will optimize the allocation efficiency of financial resources,while the volatility of the RMB exchange rate,cross-border capital outflows,and the Fed’s interest rate hikes have strengthened the role of corporate shadow banking in promoting their own risk-taking.Compared with the previous literature,the incremental contributions and innovations of this paper mainly include:(1)This paper establishes an analytical framework of "macro-financial development-micro-corporate behavior-economic impact",and clarifies the double-edged sword effect of non-financial enterprises’ shadow banking from the dual perspectives of capital allocation efficiency and risk generation.(2)Combining the current situation of China’s financial opening up,this paper puts financial openness and shadow banking into the same framework,which will help the government to think carefully about the challenges brought about by financial openness.(3)This paper clarifies that enterprises with financing advantages will re-allocate financial resources from the perspective of theoretical analysis and empirical research,and the secondary allocation of financial resources is effective.(4)This paper explains the reasons for non-financial enterprises’ external risk characteristics,and analyzes the hidden risks of non-financial enterprises’ shadow banking from the perspective of leverage ratio and risk taking.