Impact of Financialization on Operating Profit of Manufacturing Listed Companies

Gan Shengdao,Wang Qingying,Zhang Qiya,Y Ahn,F Wu

doi:10.1051/e3sconf/202021402016

Abstract

This study employs a sample of manufacturing listed companies in China from fiscal year 2008 to 2018, analyzes their financial position and operating performance, and explores the impact of financialization on their operating profits. The results suggest that the financialization of manufacturing listed companies will restrain the growth of operating profit, that is the “crowding out” effect. This paper reminds the listed companies’ controlling shareholders of the economic consequences of financialization at the micro level and the significance of improving the company’s core competitiveness, further promotes companies to strengthen the internal control of financialization for sustainable development of the companies.

Highlights

Since the 19th National Congress of the Communist Party of China in 2017, government have proposed and advocated high-quality development of enterprises
Dividing financial assets into monetary financial assets and non-monetary financial assets, we found that manufacturing listed companies are still mainly investing in non-monetary financial assets
For listed companies in the manufacturing industry, will increasing corporate financialization activities help the development of manufacturing companies to have a "boosting" effect because they receive funding support from investment income? Will financialization bring a "crowding out" effect to manufacturing companies because the allocation of resources to financial assets will weaken the development of the company's main business? Based on these two effects, to explore the impact of financialization activities on the real industry, this paper will focus on manufacturing listed companies and study the impact of corporate financialization on operating profits

Summary

Introduction

Since the 19th National Congress of the Communist Party of China in 2017, government have proposed and advocated high-quality development of enterprises. Some listed companies in the non-financial industry are constantly involved in the financial industry in addition to their main businesses, holding growing financial assets. It is worth discussing whether it will affect the quality of enterprise development. According to the 2018 annual report, Yanghe company has accumulated a cumulative investment of 20.619 billion yuan in financial assets, accounting for 41.6% of total assets Another evidence of financialization at the micro level is that the capital accumulation model of nonfinancial enterprises has changed, and the source of corporate profits has shifted from the traditional production and trade process to the financial channel [5][6]. For listed companies in the manufacturing industry, will increasing corporate financialization activities help the development of manufacturing companies to have a "boosting" effect because they receive funding support from investment income? Will financialization bring a "crowding out" effect to manufacturing companies because the allocation of resources to financial assets will weaken the development of the company's main business? Based on these two effects, to explore the impact of financialization activities on the real industry, this paper will focus on manufacturing listed companies and study the impact of corporate financialization on operating profits

Theoretical analysis and Hypothesis

Data and Research Design

Variable Description

Findings

Research design