Strict financial regulation and corporate credit availability: Evidence from the new asset management regulation in China

Strengthening financial regulation, effectively preventing and resolving financial risks are key factors for advancing financial supply-side reform and alleviating the “real-to-virtual” trend in the Chinese economy. Nevertheless, regarding financial regulatory policy, which serves as a crucial instrument of government intervention in the financial development model, the efficacy of its loan assistance for real enterprises is controversial. This work presents a quasinatural experiment using the New Asset Management Regulation promulgated in 2018 as an exogenous policy shock and takes annual data of China's nonfinancial listed corporations from 2014 to 2022 as the research sample to examine the impact of this regulation on the credit availability of corporations. The results of a difference-in-differences model show that since the implementation of the regulation, credit availability to enterprises has decreased significantly, and this effect is more significant for non-state-owned and large-scale enterprises, those whose senior executives have financial backgrounds, and those in regions with low levels of bank competition. Mechanism analysis shows that the New Asset Management Regulation reduces credit availability by curbing regulatory arbitrage and tightening external financing constraints. Regarding economic consequences, the negative impact of this regulation on firm credit availability increases the scale of nonfinancial enterprises' shadow banking business and firms' operational and default risks. The conclusions reveal how the New Asset Management Regulation affects enterprises, demonstrating the microeconomic consequences of financial regulation from the perspective of credit availability, and provide theoretical insights for the coordinated development of the financial regulatory system and a high-quality economy.