De-financialization and the Increase in Corporate Research and Development Intensity: The Effects of China's 2018 New Asset Management Rules

Abstract

In 2018, China implemented the Guidelines on Regulating the Asset Management of Financial Institutions, a financial regulation aimed at restricting enterprises' financial investments through asset management products. This policy sought to curb corporate financialization and potentially impact other corporate activities. Treating this policy as a quasi-experiment, the present study employed a generalized difference-in-differences regression model to examine its effect on corporate research and development (R&D) from the perspective of de-financialization. Using data from Chinese listed companies spanning 2013 to 2022, the key findings are as follows: (i) The policy significantly boosted corporate R&D intensity. Enterprises with higher levels of financialization before the policy experienced a more substantial increase in R&D intensity after its implementation. (ii) Heterogeneity tests reveal that the positive effect of the policy on R&D was more pronounced for firms in high-tech industries, those with greater corporate transparency, and those receiving more government subsidies. (iii) The policy's impact on R&D was driven by the reallocation of resources from financial to real assets, as well as the alleviation of firms' financing constraints.