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This article investigates the effects of strict financial regulations on corporate supply chain finance in China.

June 19, 2026Applied Economics Letters0 citations

The unintended consequences of strict financial regulation: evidence from China’s New Asset Management Regulation

ZCZe Chen JZJunkang Zhang YWYi-Xiang Wang

Key Points

This article investigates the effects of strict financial regulations on corporate supply chain finance in China.
Examined listed Chinese firms from 2013 to 2023.
Utilized a generalized difference-in-differences (DID) model for analysis.
Analyzed effects on firms with varying financing constraints and R&D intensity.
Strict financial regulation significantly restrains supply chain finance participation.
The effect is more pronounced in firms with higher financing constraints and lower R&D intensity.
The regulation leads to worsened liquidity constraints and reduced risk-bearing capacity, destabilizing customer-supplier relationships.

Abstract

This article examines how China’s New Asset Management Regulations, an exogenous regulatory shock, affects corporate supply chain finance. Based on a sample of listed Chinese firms (2013–2023) and a generalized DID model, we find strict financial regulation restrains firms’ supply chain finance participation. This inhibitory effect is stronger for firms with greater financing constraints and lower R&D intensity. Mechanism analysis shows the regulation mainly curbs supply chain finance by worsening firms’ liquidity constraints and lowering their risk-bearing capacity. Further analysis finds that the regulation-induced drop in supply chain finance destabilizes firms’ customer and supplier relationships. This study clarifies how strict financial regulation impacts corporate supply chain finance, offering new evidence for emerging economies to design differentiated regulatory targets and channel financial resources to precisely support supply chains.

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