Journal
INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS
Volume 91, Issue -, Pages -Publisher
ELSEVIER SCIENCE INC
DOI: 10.1016/j.irfa.2023.103017
Keywords
Negative list for market access; Financing constraints; Debt financing cost; Supply-side reform
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This study demonstrates that deregulating market access can significantly reduce the cost of corporate debt financing, mainly by reducing transaction costs. Additionally, the implementation of the pilot project has a significant effect on reducing debt financing costs for companies with low marketization degree of credit fund allocation or non-SOE firms.
Based on the quasinatural experiment of implementing the negative list for market access pilot project in batches in different provinces of China from 2016 to 2017, we use the difference-in-differences (DID) method to test the impact of the deregulation of market access on the cost of corporate debt financing. Our results show that (1) the deregulation of market access can significantly reduce the cost of corporate debt financing; (2) the mechanism test shows that the mechanism for reducing the cost of corporate debt financing is to reduce transaction costs; (3) the implementation of the pilot project has a significant effect on reducing the debt financing cost of companies in regions with low marketization degree of credit fund allocation or of non-SOE firms; (4) after implementing the pilot project, the proportion of corporate debt financing in total financing increased. Deregulating market access is an important part of supply-side structural reform (in short, supply-side reform), an economic policy reform in China starting in 2015. This research enriches the literature on the cost reduction of China's supply-side reform.
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