Does environmental regulation caused by air pollution reduce shadow banking for non-financial companies? Based on the exit perspective of implicit government guarantee

As China's economy enters the stage of high-quality development, the sustainability of development becomes increasingly important. Therefore, this study takes air quality index as the explanatory variable, the level of shadow banking as the explained variable, and environmental regulation as the intermediary variable to empirically study whether environmental regulation caused by air pollution will affect the shadow banking of non-financial enterprises. The findings suggest that air pollution is likely to strengthen environmental regulation, thereby reducing the level of shadow banking, as air pollution strengthens environmental regulation, leading to the reduction of implicit government guarantees, while enterprises tend to abandon or minimize reliance on these guarantees and reduce leverage. The mechanism test shows that the ESG performance of non-financial firms weakens the process by which air pollution reduces the degree of shadow banking of non-financial firms, while the short-sightedness of management enhances this process. Heterogeneity analysis shows that this process is more significant under the effect of market-driven environmental regulation and in private enterprises and enterprises in regions with large industrial scale. Therefore, the policy implication is that government should continue to strengthen environmental law enforcement in future supervision, as this can not only reduce pollution levels but also reduce systemic financial risks. Enterprises should also increase their sense of social responsibility.

Interest-driven and legal supervision innovation of the capital pool model in Chinese banking financial products

This paper studies the formation, interest-driven rationality and potential risks of the capital pool model in China's banking financial management business, as well as the correlation, coincidence and complexity of fund pool prohibition and the rigid payment strategy. Focusing on "The New Regulations on Asset Management" issued by the Chinese government in April 2018, this paper discusses the regulatory effects and existing problems of fund pool prohibition and rigid payment regulations. From the perspective of theoretical and empirical analysis, this paper studies the impact of the relationship between financial product yield and regulatory interest rate relationship on shadow banking. The paper also studies the capital pool model that is closely related to the shadow banking, rigid payment and unstandardized debts, so as to puts forward relevant policy suggestions on improving the external regulation and optimizing the internal control mechanism of shadow banking. This paper puts forward that pursuit of financial security value should not be independent from the development of the overall interests of asset management market. The reasonable and healthy development of the asset management industry should be guided by the principle of controlling the risks at an appropriate level. The regulations in relation to capital pool and rigid payment needs more flexibility and elasticity to help reduce or eliminate the negative impact on the efficiency of resource allocation in the asset management industry. Shadow banking plays an important role in the financing of small and medium-sized enterprises, which is the result of mutual competition and game between different banks in terms of yield rate. Moderate shadow banking scale plays a positive role in the macro economy. This argument has theoretical value and practical significance to ensure that the regulatory system is resilient to the financial system in the most effective way possible.

The impact of bank's engagement in shadow banking activities on bank's sustainability: Evidence from Chinese commercial banks

The economic and environmental consequences of bad banking practices have aroused much attention. In China, banks are at the center of shadow banking activities through which they avoid regulation and support environmentally unfriendly businesses such as fossil fuel companies and other high-pollution enterprises. In this paper, we study the impact of bank's engagement in shadow banking activities on its sustainability by using annual panel data of Chinese commercial banks. The result shows that bank's engagement in shadow banking activities has a negative impact on its sustainability and the negative impact of bank's engagement in shadow banking activities is more pronounced for city commercial banks and unlisted banks which are less regulated and lack corporate social responsibility (CSR). Furthermore, we explore the underlying mechanism of our findings and prove that bank's sustainability is impeded because it transforms high-risk loan into shadow banking activities which are less regulated. Finally, by using difference-in-difference (DiD) approach, we find that bank's sustainability improved after the financial regulation on shadow banking activities. Our research provides empirical evidence that the financial regulation on bad banking practices is beneficial for bank's sustainability.

The impact of shadow banking activities on carbon dioxide emissions: empirical evidence from China

Financial activity plays an important role in the analysis of environmental and ecological implications. Previous research shows that shadow banking activities, informal and less regulated financial activities, have become an important part of financial systems after the 2008 financial crisis. However, the impact of shadow banking activities on carbon dioxide emissions has been ignored in previous research. In this paper, we use the panel annual data of 30 Chinese provinces over the period 2013-2020 to study the effect of shadow banking activities on carbon dioxide emissions. The result shows that shadow banking activities have a positive impact on carbon dioxide emissions, and the result is still robust by using dynamic panel regression with general method of moments (GMM) method. Heterogeneity analysis shows that the impact of shadow banking activities on carbon emissions is more pronounced for the secondary industry, which proves that shadow banking activities support more for environmentally unfriendly businesses. Furthermore, by using difference-in-difference (DiD) method, we examine the causal effect of shadow banking regulation policy on carbon dioxide emission reduction and demonstrate that the shadow banking regulation can reduce carbon dioxide emissions. Our research contributes to environment protection and achieving the goal of low-carbon economy by exploring the role of shadow banking activities and financial regulation in carbon dioxide reduction.

COVID-19 pandemic risk and probability of loan default: evidence from marketplace lending market

As the COVID-19 pandemic adversely affects the financial markets, a better understanding of the lending dynamics of a successful marketplace is necessary under the conditions of financial distress. Using the loan book database of Mintos (Latvia) and employing logit regression method, we provide evidence of the pandemic-induced exposure to default risk in the marketplace lending market. Our analysis indicates that the probability of default increases from 0.056 in the pre-pandemic period to 0.079 in the post-pandemic period. COVID-19 pandemic has a significant impact on default risk during May and June of 2020. We also find that the magnitude of the impact of COVID-19 risk is higher for borrowers with lower credit ratings and in countries with low levels of FinTech adoption. Our main findings are robust to sample selection bias allowing for a better understanding of and quantifying risks related to FinTech loans during the pandemic and periods of overall economic distress.

Shadow banking: a bibliometric and content analysis

This study reports on our systematic review of 2008-2021 literature on shadow banking. We present an overview of the shadow banking sector, wherein we discuss the definitions, evolution, functions, and specific activities that comprise it. We conducted a bibliometric analysis using the VOSviewer bibliometric tool on articles collected from the Scopus database, after which we conducted content analysis on top articles from leading sources, and identified four major streams of shadow banking literature. Additionally, we identified gaps in the literature and proposed seven research questions to be addressed in future studies to advance knowledge of the shadow banking sector. The findings of this review may serve as a robust reference for scholars researching various aspects of shadow banking to develop our understanding of this sector.