Does administrative monopoly regulation affect corporate financialization? From the perspective of vertical industrial chain competition in China

Corporate financialization in China is a unique problem rooted in the institutional system. Excessive administrative intervention results in "administrative monopoly", harming the business environment and stimulating the growth of corporate financialization. The Fair Competition Review System, FCRS, was introduced in 2016 to break local protectionism and regulate the administrative monopoly. This paper examines whether and how FCRS influences corporate financialization from the perspective of vertical industrial chain competition. Using data from China's listed companies from 2013 to 2019, we find that implementing FCRS has exerted a suppression effect on the level of financialization for the upstream corporations. Further, we find FCRS cuts off the financing support, and the managers will reserve more cash to mitigate the risk responsively, which crowds out the financial investment.