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Does administrative monopoly regulation affect corporate financialization? From the perspective of vertical industrial chain competition in China

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  • Xu, Nuo
  • Gao, Yubin
  • Du, Lizhen
  • You, Liang

Abstract

Corporate financialization in China is a unique problem rooted in the institutional system. Excessive administrative intervention results in “administrative monopoly”, harming the business environment and stimulating the growth of corporate financialization. The Fair Competition Review System, FCRS, was introduced in 2016 to break local protectionism and regulate the administrative monopoly. This paper examines whether and how FCRS influences corporate financialization from the perspective of vertical industrial chain competition. Using data from China's listed companies from 2013 to 2019, we find that implementing FCRS has exerted a suppression effect on the level of financialization for the upstream corporations. Further, we find FCRS cuts off the financing support, and the managers will reserve more cash to mitigate the risk responsively, which crowds out the financial investment.

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  • Xu, Nuo & Gao, Yubin & Du, Lizhen & You, Liang, 2023. "Does administrative monopoly regulation affect corporate financialization? From the perspective of vertical industrial chain competition in China," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612323000223
    DOI: 10.1016/j.frl.2023.103648
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    References listed on IDEAS

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    Cited by:

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    2. Li, Hanteng & Qin, Yun, 2024. "Land financialization and regional innovation dynamics: Evidence from China," Finance Research Letters, Elsevier, vol. 64(C).
    3. Wu, Kai & Lu, Yufei, 2023. "Corporate digital transformation and financialization: Evidence from Chinese listed firms," Finance Research Letters, Elsevier, vol. 57(C).
    4. Shen, Zhou & Sun, Sisi & Zhu, Yingtao, 2024. "Shadow banking, credit term structure, and financialization of manufacturing firms," Finance Research Letters, Elsevier, vol. 60(C).
    5. Zhang, Yongle & Zhang, Haoliang & Yang, Liming & Xu, Pengjie, 2023. "Managerial ownership and corporate financialization," Finance Research Letters, Elsevier, vol. 58(PD).
    6. Xiao, Zumian & Wang, Shuhan & Zhang, Yepeng & Si, Deng-Kui, 2023. "Power of competition: Unraveling the impact of China's fair competition review system implementation on firm innovation," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1561-1581.
    7. Zhu, Zhaohui & Huang, Yang & Hu, Chao & Yan, Youliang, 2024. "The green effects of competition: administrative monopoly regulation and green innovation," Finance Research Letters, Elsevier, vol. 64(C).

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