Enterprise Financialization and Technological Innovation: An Empirical Study Based on A-Share Listed Companies Quoted on Shanghai and Shenzhen Stock Exchange

Abstract

In recent years, the growth rate of China’s real industry has slowed down while the financial industry has entered a phase of rapid development. Driven by the profit-seeking motive of capital, real enterprises tend to carry out financial investments, and the degree of corporate financialization has been rising. This paper selects A-share listed enterprises in Shanghai and Shenzhen from 2009 to 2020 as research samples to study the impact of corporate financialization on technological innovation and the mediating effect of financing constraints from the perspective of financial asset holding. The study found that the financialization of enterprises’ crowding out effect on technological innovation has led to the phenomenon of “turning from real to virtual”. We also found that the crowding-out effect had experienced lag. This conclusion still held when we controlled for endogeneity. The heterogeneity analysis showed that the financialization of non-state-owned enterprises had an excessive inhibitory effect on technological innovation, and the financialization of enterprises in eastern China has had a remarkable inhibitory effect on technological innovation. The influence mechanism analysis showed how financing constraints played a crucial mediating role in corporate financialization inhibiting technological innovation, and corporate financialization has inhibited technological innovation by exacerbating financing constraints. Based on this research, we propose targeted suggestions to prevent the excessive financialization of enterprises on both government and enterprise levels.