Regional Corruption?Fiscal Decentralization And Shadow Banking

Since the outbreak of the sub-prime loan crisis in 2007,the shadow bank in China has shown the development trend of "explosive" growth.The shadow bank is a double-edged sword.On the one hand,it provides financing support to the small and medium-sized enterprises by absorbing a large amount of social idle funds,to some extent,it relieves the financing bottlenecks faced by the small and medium-sized enterprises and improves the allocation efficiency of our financial resources.On the other hand,because the supervision of shadow banking by the financial authorities is difficult,the shadow banking system has great financial risks.Therefore,it is urgent to strengthen the theoretical interpretation and empirical research on the formation mechanism of shadow banking.In addition,the rapid development of our country's economy has also produced a relatively heavy phenomenon of corruption,corruption has worsened the institutional environment for the development of enterprise innovation and reduced the efficiency of capital allocation,so whether regional corruption has an impact on the size of shadow banks? Under the system of fiscal decentralization in the tax system of our country,local government has a strong internal impetus to develop economy,which leads to the increase of investment and financing demand of government and enterprises.So what is the relationship between fiscal decentralization and shadow banking? In this context,the study of regional corruption and fiscal decentralization on the development of shadow banking not only helps to answer the above questions,but also has important theoretical and practical significance to guide the development of shadow banking in China.In order to have a comprehensive understanding of the shadow banking system in China,this paper first expatiates on the development status and potential risks of shadow banking in China,and makes a comparative analysis with developed countries in Europe and America.Secondly,this paper expounds the mechanism of regional corruption and fiscal decentralization on shadow banking.uption depends on investment in political capital.Active and passive bribery among corrupt people does not produce any new products or services,resulting in the waste of social resources and reducing public investment capacity.Because shadow banks in China mainly collect funds from enterprises and individuals for financing,regional corruption causes some private wealth to form a vicious circle in the unproductive field,crowding out the sources of shadow banks and hindering their development.Secondly,regional corruption has worsened the institutional environment on which small and medium-sized enterprises depend for their survival and development,increased the production cost of enterprises,reduced the demand of small and medium-sized enterprises for financing from shadow banks,and was detrimental to the development of shadow banks.Under the dual role of fiscal decentralization system and incentive mechanism for promotion of officials,local governments have a strong motivation to actively develop local economy and support local enterprises.Under the influence of the current official appraisal and promotion mechanism and the regional GDP tournament,the region launched fierce competition for the purpose of GDP growth,which led to the increase of the region's investment and financing demand,and the development of shadow banks.Finally,the paper takes the size of shadow bank as the explanatory variable,regional corruption and fiscal decentralization as the core explanatory variable,and uses the standard inter-provincial panel data model to test the influence of regional corruption and fiscal decentralization on the shadow bank.In order to increase the reliability of the regression results,the conservativeness test is made by removing samples and changing time period.Through theoretical and empirical research,this paper concludes that regional corruption reduces the public's investment capacity and squanders the sources of shadow banks.At the same time,the system environment of innovation development of small and medium enterprises has been deteriorated,and the demand of financing to shadow banks has been weakened,In turn,the development of shadow banking has been hampered.Under the fiscal decentralization system of tax division,because the government has the endogenous power to speed up the local economy construction,the demand of the local government and enterprises to invest and finance through the shadow banking channel increases,which promotes the development of shadow banking.On the basis of the above research,this paper puts forward four policy suggestions to further promote the healthy development of shadow bank in China from the aspects of reducing corruption,rationally decentralizing power between central government,accelerating human capital accumulation and improving supervision system.