The Impact of Monetary Policy Uncertainty on Corporate Financialization—Evidence from China

Abstract

This paper conducts an empirical analysis of the impact of monetary policy uncertainty on the financialization of China’s non-financial listed companies from 2008 to 2020. Utilizing a large dataset, the findings indicate that monetary policy uncertainty has a significant negative impact on the financialization behavior of listed companies. This effect is particularly pronounced in non-state enterprises, firms led by executives with financial backgrounds, those holding dual positions, and those located in areas with high levels of bank competition. The results further suggest that the mechanism underlying this effect is due to a reduction in the returns on firms’ financial assets and an increase in their debt financing costs. The empirical results stay robust to the use of the instrumental variables approach and the generalized method of moments (GMM) estimation to address the potential endogeneity problem.