Identifying shadow banking activities of non-financial firms in China: evidence from consolidated balance sheet

WANG Yongqin 1 LIU Zihan2 LI Chang 3 DU Julan 3

(1.China Center for Economic Studies, Fudan University)
(2.School of Economics, Fudan University)
(3.Department of Economics, Hong Kong University)

【Abstract】In financially less developed emerging economies, many non-financial firms are conducting real financial intermediary activities, where they re-lend the funds from bank loans to other firms. Those financial intermediary activities not ruled by banking regulations have been a part of the shadow banking activities. Existing literature has not fully studied the shadow banking activities outside financial systems. Based on the pecking order theory, this paper examines this problem by investigating the changes in firms’ balance sheets. We utilize Standard Poor’s Compustat Global firm database, taking the 2618 listed companies in the U.S in the same time period as control group, to investigate the consolidated balance sheets of the 2304 listed companies in China from 2000 to 2012 and use three strategies to identify the shadow banking activities of Chinese firms. Meanwhile, we find that compared to private firms, state-owned firms are more involved in shadow banking activities, and that growth firms are less involved in shadow banking activities. The findings of this paper help the academia and policy makers to better understand the operations of Chinese financial systems with better regulatory policy implications.

【Keywords】 firms re-lending; shadow banking; pecking order theory; (consolidated) balance sheet;

【DOI】

【Funds】 The Program for New Century Excellent Talents in University of Ministry of Education The Project of International Competitive Innovation Base of Chinese Economy for 985 University of Fudan University The Social Science Research Project of the Overall Progress of the Project 985 Phase III of Fudan University The Key Subject Construction Project of Shanghai (B101) The Key Project of National Social Science Foundation of China(12&ZD074) Shanghai Pujiang Talents Project (2011) Shanghai University Talents (China Center for Economic Research)

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    Footnote

    [1]. ① Data obtained from Economic Daily. [^Back]

    [2]. ② In November 2006, there were 8 official ministries that posted provisions stating that if the processing of related-party loans had not satisfied the regulations, the executives of the company would be prosecuted. [^Back]

    [3]. ③ Norm liabilities refer to some amount of cash retained by firm, as required by current financial liquidation procedures, that is reserved for recurring deferred payments, which mainly include wages payable, benefits payable, taxes payable, accrued expenses and other payables. [^Back]

    [4]. ④ All the data that this paper used in the figures comes from Compustat Global database and WIND database. [^Back]

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This Article

ISSN:1002-5502

CN: 11-1235/F

Vol , No. 12, Pages 24-40

December 2015

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Article Outline

Abstract

  • 1 Introduction
  • 2 Literature review
  • 3 Identification strategies, data and descriptive facts
  • 4 Analysis of empirical results
  • 5 Conclusion
  • Footnote

    References