High-speed railway and shadow banking: evidence from finance leases

ABSTRACT

This paper empirically investigates the effect of improved transportation infrastructure on finance leases, a representative form of China’s shadow banking sector, using a sample of Chinese listed companies. We find robust evidence that there is a significant decline in firms’ finance leases after the opening of the high-speed railway (HSR). Furthermore, HSR brings more favourable contract terms of leasing, including larger financing size, longer maturity, and lower cost. The heterogeneity analysis shows that HSR mainly reduces the costly nonbank-affiliated leases, and finance leases are reduced primarily in state-owned enterprises.

KEYWORDS:

• High-speed railway
• shadow banking
• financial leasing
• difference-in-differences

JEL CLASSIFICATION:

• G23
• L92
• P25

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data presented in this study are available on request from the corresponding author. The data are not publicly available due to privacy.

Notes

¹ In 2006, the State Council of China issued the State Council Policy Note No. 11 [2006]: Notice on Speeding Up the Structural Adjustment of Overcapacity Industries (《国务院关于加快推进产能过剩行业结构调整的通知》). Over the past decade, the government has attached great importance to curbing overcapacity. In 2020, National Development and Reform Commission took the lead in issuing the National Development and Reform Commission Note No. 901 [2022]: Notice on Doing a Good Job in Resolving Excess Capacity in Key Areas in 2020 (《关于做好2020年重点领域化解过剩产能工作的通知》), restating the necessity of the de-capacity work.

Additional information

Funding

This research was funded by the research fund of North China University of Technology, grant number 110051360002 and 4020548422J8, Beijing Municipal Education Commission, grant number,110052972027/129, and Scientific research Projects of colleges and universities in Anhui Province, grant number gxgwfx2021007 and 2022AH050364.