Abstract
This paper aims to examine the impact of corporate financialization on economic value added (EVA). The panel regression model and threshold effect model are used based on data from 913 Chinese A-share listed companies between 2007 and 2016. The results show that the proportion of financial channel profit has a significant negative effect on EVA. Furthermore, the moderate range in the impact of the corporate financialization level on EVA is also captured. Besides, the impact of corporate financialization on EVA is heterogeneous among industries with intensity factor differences. The results of this study are very relevant to investors and managers. For instance, corporate financial management can be adjusted and supervised according to the moderate range and direction. The government should combine industry characteristics to create different support policies.
Highlights
economic value added (EVA) plays a crucial role in corporate sustainable development, and the impact of corporate financialization on EVA is very complicated, and previous literature has not reached a consensus on the direction of the impact
The dual goal of corporate financialization makes the level of financialization has a positive effect on EVA with a moderate range. when non-financial companies use part of their idle funds to make short-term financial investments, they can improve the efficiency of the use of funds, activate funds, and achieve the purpose of capital preservation and appreciation
When the financial channel profits are at a negative value which is less than the threshold, the level of financialization has a positive effect on EVA
Summary
EVA (economic value added) plays a crucial role in corporate sustainable development, and the impact of corporate financialization on EVA is very complicated, and previous literature has not reached a consensus on the direction of the impact. The preventive goal considers that necessary corporate financial asset investment can alleviate liquidity risks, promote the growth of corporate economic value added, and maintain the real economy. When companies face favorable investment projects, increasing financial asset investment to obtain economic benefits can provide strong financial support for the real industry (Corpatauxet et al, 2009) and achieve a short-term increase in the corporate economic value added It is a kind of capital reserve behavior for companies to allocate financial assets for fund management to obtain high financial returns, which is conducive to the corporate operation and sustainable development. Excessive investment in financial assets will lead to insufficient industrial capital supply, increase the corporate business risk, and affect the long-term increase of the corporate economic value added.
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