Effect of Shadow Banking Activities on Firm Risk and Performance: Entrusted Loan Evidence from Chinese Listed Firms. (9th May 2022)

• Record Type: Journal Article
• Authors: Wang, Xiaoyan; Qiao, Sijia; Shen, Chung‐Hua; Wu, Meng‐Wen; Wang, Juan
• Is Part Of: Asia-Pacific journal of financial studies. Volume 51:Number 2(2022)
• Page Start: 256
• Page End: 290
• Publication Date: 2022-05-09
• Subjects: Shadow banking -- Entrusted loans -- Bankruptcy risk -- Performance; G3 -- G32 -- G33; Pacific Area -- Economic conditions -- Periodicals; Finance -- Asia -- Periodicals; Finance -- Pacific Area -- Periodicals; Asia -- Economic conditions -- Periodicals; 332.09505
• DOI: 10.1111/ajfs.12367
• Languages: English
• ISSNs: 2041-9945

Abstract

Abstract: This study investigates the effect of non‐financial firms' activities in shadow banking on firm risk and performance. Using manually collected data of entrusted loans from Chinese listed firms, we find that lending firms' bankruptcy risk and performance increases from their engagement of entrusted loan businesses in the year the loans are issued and in the following year. Further, firms' risk increases and performance improves significantly when firms are financially healthy, financially constrained, and non‐state‐owned. Overall, our findings provide policy implications that the risk of shadow banking activities must be cautious.