New Regulatory Rules,shadow Banking And Public Confidence

Shadow banking is a theoretical and practical issue that academia and government regulatory agencies are concerned about.Under rapid development,shadow banking may cause financial risks,which is consensus of the academia and practical community because of the characteristics of maturity mismatch,liquidity conversion,credit conversion,and high leverage.In order to prevent financial risks,in response to shadow banking issues,China formally issued the "Guiding Opinions on Regulating the Asset Management Business of Financial Institutions" in April 2018,which is,the "New Asset Management Regulations".The new asset management regulations unified the regulatory standards for different financial institutions’ participation in asset management business by breaking rigid redemption,eliminating nesting,deleveraging and other core measures.By strengthening supervision,raising the threshold and reducing the expected returns,it greatly restricts shadow banking activities of financial institutions.From the perspective of investors,the paper takes the issuance of a series of new asset management regulations as exogenous events.By using event study,combining with the Baidu index,and identifying the excess returns of A-share listed banks in China,the paper try to find out how investors react to commercial banks during the events of new asset management regulations.The study found that it has a significant positive effect on bank stocks,which indicates that investors believe that supervision can effectively regulate shadow banking business,prompt banks to adjust their business,and benefit the banks.Then their investments will be more secure and reliable.In addition,the small and medium-sized banks,which relied more on shadowing banking,their stocks’ average cumulative excess returns are larger in the first event,and smaller in the last event.The explanations for this may be:when the specific implementation rules are not clear,investors tend to believe that the benefits of regulatory tightening will be more pronounced in banks that rely more on shadow banking.As time progresses,investors’ awareness of the new asset management regulations is constantly deepening;the release of supporting rules and other policy documents refines the regulatory requirements and clarifies specific operational issues.Investors tend to believe that in the transition period,banks that rely more on shadow banking will face greater pressure for transformation,and therefore they’re more cautious.