Strengthening financial regulation and total factor productivity in China

In the context of China's economic transition, total factor productivity (TFP) serves as a metric for assessing industry upgrading and economic performance enhancement. This study specifically examines the impact of China's 2018 New Asset Management Regulations on corporate total factor productivity among Chinese listed companies. Using panel data from 3201 publicly traded companies (2013–2023), we employ a generalized difference-in-differences method with fixed-effects regression models. Analysis reveals that this specific regulatory intervention significantly enhances total factor productivity. The study explains how the 2018 regulations affect total factor productivity through five mechanisms: corporate risk-taking, debt financing costs, innovation levels, human capital investment, and R&D investment ratios. Heterogeneity analysis shows that this particular policy's effects are more pronounced in eastern regions, private companies, and firms with financial management expertise. This research provides specific evidence from China regarding how targeted asset management regulatory reform impacts enterprise productivity, offering insights into the real economic effects of this major financial regulatory intervention.