Corporate financing from shadow banking and bond credit spreads

Abstract

This paper studies the impact of the scale of shadow banking financing of enterprises on the credit spreads of bonds. Using corporate bonds in China's capital markets, we find that the scale of funds incorporated by enterprises' shadow banking channels has a significant positive impact on the credit spreads of bonds. We further find that the region, property rights, and profitability of bond-issuing enterprises all have significant moderating effects on the above impact. Specifically, shadow bank financing positively impacts bond credit spreads for enterprises in the central and western regions, with weaker profitability and non-state-owned enterprises.