Financial Development,shadow Banking Regional Mobility And Back-Feeding Effect

In recent years,shadow banking has increased significantly,causing the wide attention from academia and regulatory authorities.As an important part of financial system,it is more and more important how the shadow banking works and what role it plays.Especially,under the background of regional differences in China's financial and economic development,it is urgent to solve the problem of whether there is a regional mobility and what economic effect is produced in the shadow banking.Using a sample of entrusted loans of listed companies between 2004 and 2015,this paper investigates how shadow banking operate in China from regional perspective.The theoretical analysis reveals that under the background of regional differences in financial development level,firms located in eastern regions have the financial privilege,meanwhile firms located in central or western regions are often subject to financial constraints.It makes both have incentive to achieve win-win through lending transactions,resulting in entrusted loans showing cross-regional flows.Empirical studies verify the theoretical analysis.There is a significant cross-regional flow of entrusted loans,which from regions with high level of financial development to regions with low level of financial development.Further research indicates that entrusted loans from regions with high level of financial development to regions with low level of financial development are larger,longer and cheaper.It means that entrusted loans have alleviated the financial constraints of firms located in central or western regions,and had a “Back-Feeding Effect” on the firms located in regions with low level of financial development,which is conducive to promoting the balanced development of regional economy.This paper helps us to understand the role played by shadow banking in financial system and its mechanism.And it is helpful for supervision of shadow banking.