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Shadow banking activities of non-financial companies and the information content of stock prices

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  • Han, Xun
  • Feng, Yue
  • Li, Jianjun

Abstract

In recent years, corporate investment rate has been declining, and they have been allocating financial capital to the shadow credit market, which lead to accumulation of financial risks. Based on the annual data of non-financial listed companies from 2007 to 2019, this paper explores the impact of non-financial companies’ shadow banking on the information content of stock prices. Results show that shadow banking of non-financial enterprises reduce the information content of stock price, and the above effects are more significant in regions with lower social trust and higher policy uncertainty, private enterprises, and enterprises without political connection. Enterprises engage in shadow banking can impact idiosyncratic information content of stock price through channels of earning management, irrational investor behavior, creditor risk concerns and informed trading; Analysts over-optimism and insider trading can also have an impact on the relationship between shadow banking activities and synchronization of stock price. This paper analyzes economic consequences of non-financial enterprises’ shadow banking activities, thus providing important theoretical support and policy guidance for enhancing signal mechanism of securities market, improving capital market efficiency of resource allocation, deepening financial market-oriented reforms.

Suggested Citation

  • Han, Xun & Feng, Yue & Li, Jianjun, 2023. "Shadow banking activities of non-financial companies and the information content of stock prices," Journal of Asian Economics, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:asieco:v:85:y:2023:i:c:s1049007823000143
    DOI: 10.1016/j.asieco.2023.101594
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Stock price information content; Shadow banking of non-financial enterprises; Synchronization of stock price; Informed trading;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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