Macroprudential policy and corporate long-term investment: evidence from China

After the financial crisis, macroprudential policies have gradually become an important regulatory tool for central banks in various countries. Based on the background of the People’s Bank of China adding medium- and long-term loan and credit loan metrics to the macroprudential assessment system in 2019, this paper implements a difference-in-differences (DID) approach to systematically test the impact of loose macroprudential policies on corporate long-term investment. Compared with other firms, listed manufacturing firms that benefited from the policy have increased their long-term investment share by 0.7% points. We also find that the policy effects are more pronounced for enterprises with lower regional financial development levels, lower operating risks, greater profitability, stronger bank-enterprise ties, and weaker long-term debt financing capabilities. Mechanism analysis show that the alleviation of financing constraints and the increase in the proportion of long-term loans for beneficiary manufacturing firms is the crucial factor contributing to the investment promotion effect of macroprudential policies. Further analysis shows that the addition of macroprudential assessment metrics is conducive to reducing corporate short-term debt for long-term use and short-term loan for long-term investment behaviour, increasing corporate capital and R&D investment, and improving corporate investment efficiency.