Work

Administrative monopoly regulation and the cost of debt financing: Evidence from China

Year: 2025

Type: article

Abstract: Traditional antitrust research has primarily focused on the market-based monopoly, while less attention given to those formed by administrative power. This study explores how the Fair Competition Review System (FCRS) in China, designed to curb administrative monopoly, influences corporate debt financing costs. We find that administrative monopoly regulation reduces the cost of debt financing. Enhanced accounting information quality and lower corporate default risk are two possible channels. The main effect is more pronounced among private firms, small-sized and medium-sized firms, and firms in regions with lower degree of financial marketization. The FCRS also aids in addressing the issue of “zombie firms”, mitigating their crowding-out effect on the debt financing of normal firms. Moreover, the cost of debt financing decreases more when the review measures include both stringent self-inspection and external supervision. These findings underscore the importance of administrative monopoly regulation and contribute to the advancement of antitrust endeavors in the Asia-Pacific region.

Source: Pacific-Basin Finance Journal

DOI: 10.1016/j.pacfin.2025.102777

Authors: Shuxun Cai, Xiaoran Ni

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $3,090

Funders: National Natural Science Foundation of China, Ministry of Education of the People's Republic of China, Xiamen University, Key Laboratory of Econometrics