Financialization Of Enterprises Research Articles

The Impact of R&D Investment on The Financialization of Enterprises —— Take The Manufacturing Industry as An Example

In recent years, the excessive investment of entity enterprises leads to the phenomenon of enterprise financialization, which makes the development of entity enterprises fall into a vicious circle. How to restrain the excessive financialization trend of enterprises and promote the high-quality development of real enterprises has become an urgent problem to be solved. Based on the financial data of listed companies in A-share manufacturing industry from 2008 to 2022, this paper studies the possible inhibitory effect of enterprise R&D investment on finalized investment from the perspective of asset allocation and market competition. The results show that R&D investment is significantly negatively correlated with the level of enterprise financialization, that is, R&D investment can restrain enterprise financialization to a certain extent. Further research shows that increasing cash holding and increasing market power are two intermediary paths for R&D investment to restrain the financialization of enterprises.

Impact of Digital Economy Development on Financialization of Firms: Empirical Evidence from PVAR Model

In this paper, we select several indicators to measure the level of the digital economy in cities, the index of digital inclusive finance in cities and the degree of financialization of enterprises, we apply variables mentioned above to analyze the complex relationship between multiple variables based on the PVAR model, we firstly suppose a unique order and use impulse response function(IRF) and variance decomposition measures to predict the impact of the relationship between variables, so as to provide a reference for policy making and risk prevention. and use impulse response and variance decomposition methods to predict the future direction of the relationship between variables, so as to provide certain reference significance for policy making and risk prevention.

“Crowding Out” or “Reservoir Effect”? Unraveling the Impact of Financialization on Green Innovation in Heavy Polluting Enterprises: Evidence from China’s Listed Companies

In the era of green transformation and sustainable development, green innovation has become a key force driving the greenization of the economy and society, as well as achieving global sustainable development goals. This study aims to investigate the impact of financialization on green innovation in heavy polluting enterprises, a sector where enhancing green innovation capabilities is crucial for both industry transformation and sustained economic growth. As the financialization of enterprises deepens, its effects on green innovation become increasingly significant. Based on data from 667 listed companies in China, we explore the mechanisms through which financialization influences green innovation. Our findings reveal that financialization has both a potential “reservoir” effect, which provides financial support for green innovation, and a significant “crowding out” effect, with the latter outweighing the former, thereby suppressing investment in green innovation. Further analysis indicates that these effects exhibit significant heterogeneity across different property rights, regions, and corporate debt-to-asset ratios. Additionally, the short-term debt-paying ability of enterprises and market competitiveness play important regulatory and threshold roles in this relationship. This study not only provides a new perspective for understanding the relationship between the financialization of heavy polluting enterprises and green innovation but also offers valuable insights for promoting the coordinated development of both and addressing the challenges of green innovation.

Digital economy empowers enterprises to decrease financialization: evidence from e-commerce demonstration cities

In the current era of informatization and intelligence, achieving a profound integration of the digital and real economies is essential to high-quality economic development. This study investigates the impact of digital economy development on corporate financialization in China. It employs a staggered difference-in-differences (DID) approach anchored on the establishment of e-commerce demonstration cities. The construction of e-commerce demonstration cities is shown to significantly inhibit the financialization of enterprises, while prompting enterprises to move from "virtual to real." In the context of an economic development strategy that promotes the real economy through digitization, this paper provides new evidence that the digital economy can help enterprises to decrease financialization. Moreover, it presents specific policy implications for further promoting deep integration of the digital and real economies, and cultivating new engines for high-quality economic development.

Does managerial myopia exacerbate firms excessive financialization? Evidence from Malaysia

PurposeThis study aims to examine the influence of managerial myopia on the excessive financialization behavior of listed firms on Bursa Malaysia.Design/methodology/approachThrough a sample of 313 firms from 2015 to 2021, the author examine whether managerial myopia promotes or inhibits corporate financialization. The author uses ordinary least squares and Logit as the baseline models and addresses potential endogeneity through the dynamic-panel generalized method of moments. The results are also robust to alternative measures of financialization and managerial myopia.FindingsThe results show a significant positive effect of managerial myopia on the excessive financialization of enterprises. Furthermore, the findings indicate that the impact of managerial myopia on the over-financialization of enterprises is more prominent in periods of low economic policy uncertainty. However, the relationship between excessive financialization and managerial myopia is weakened in the presence of female chief executive officers.Practical implicationsThe empirical results have useful policy implications. First, firms should establish scientific managerial assessment and supervision systems to avoid excessive financial investment behavior by myopic managers caused by assessments that place too much emphasis on short-term performance. Second, regulators and policymakers should encourage firms to appoint women to top management positions, which may inhibit short-sighted financialization behavior. Finally, the regulatory authorities should undertake the necessary measures driving companies to disclose the investment direction of the funds so that shareholders and investors can understand the use direction of the funds in a timely manner, which can effectively prevent the economy “from the real to the virtual” and promote the development of the real economy.Originality/valueThis paper expands the existing research on corporate financialization behavior and provides a new theoretical basis for the underlying factors of excessive financialization. It studies the influence of corporate financialization from the perspective of short-run managerial actions and deepens the understanding of managerial myopia and companies’ financialization levels.

Economic environment uncertainty and financialization of real estate firms

This paper investigates the impact of economic environment uncertainty on real estate firms' financialization and explores the underlying mechanisms. This paper utilizes data from listed real estate firms from 2011 to 2021, focusing on the rationale for firms' financialization. In contrast to prior literature, this study employs the macro-level economic uncertainty index and the micro-level uncertainty perception measures to gauge economic environment uncertainty. The findings indicate that an increase in economic environment uncertainty leads to a greater inclination of firms to engage in financialization, driven by the "precautionary savings" motivation. Furthermore, this effect is primarily driven by the firm-level perception of uncertainty in the external environment. Mechanisms tests demonstrate that when there is uncertainty in the economic environment, corporations are more likely to engage in financialization, primarily due to decreased CEO overconfidence and reduced corporate risk-taking. Moreover, the level of financing constraints and executives with financial expertise contribute to the heterogeneous effects of uncertain economic conditions on real estate firms' financialization. Firms with high financing constraints and financial background executives are more likely to engage in and enlarge investments in financial assets, while firms without financial background executives are not. Furthermore, there is no notable correlation between the level of financialization of state-owned enterprises and policy fluctuations in the economic environment. The findings provide valuable insights for businesses to explore alternative paths for growth, raising awareness among government regulators about the risks associated with financialization.

Does “Going Global” help to restrain enterprises’ financialization: The Belt and Road initiative as a quasi-natural experiment

This paper employs the difference-in-differences (DID) to investigate the impact of “going global” on enterprises' financialization. Baseline estimation shows that the degree of financialization of enterprises participating in the Belt and Road Initiative was lower compared with those not participating in the Initiative. Mechanism analysis reveals that “going global” through Belt and Road Initiative has improved enterprises' profitability of real sector investment and inhibited their motivation of financialization. These findings provide new perspectives for more effectively promoting enterprises to participate in the Belt and Road construction and helping inhibit enterprises’ financialization.

Study on the Influence of Government Key Customers on the Enterprise “from Real to Virtual”

Taking China’s Shanghai and Shenzhen A-share listed companies from 2007 to 2020 as samples, this paper studies the influence of government background key customers on the financialization of real enterprises. The research finds that the government background big customers reduce the degree of financialization of real enterprises; The heterogeneity test found that, compared with state-owned enterprises, the inhibition effect of big customers with government background on the financialization of real enterprises was more significant in non-state-owned enterprises and industries with fierce competition; The mechanism test found that the government background large customers suppressed the financialization of real enterprises by easing the financing constraints and improving the net profit level. Research shows that the government, as a major customer of enterprises, is an important means to give play to the visible hand of the government, which can effectively reduce the level of financialization of real enterprises and promote high-quality economic development, and can be an important starting point for the country to prevent systemic financial risks.

Tax reduction incentive and corporate financialization

This paper investigates the influence of tax reduction incentives on firms' financialization based on the data from A-share listed companies spanning 2010 to 2022. The findings indicate that tax reduction incentives can effectively hinder firms' financialization. Furthermore, the mechanism test reveals that the reduction of financing constraints and the rise in fixed asset investments play a crucial intermediary role. Considering the diverse nature of company property rights and advanced technology, the analysis suggests that the impact of tax reduction incentives on the financialization of enterprises is more pronounced in private and conventional technology enterprises.

“Tax reduction” and the financialization of real enterprises: Evidence from China’s “VAT reform”

Structural tax reduction represents a crucial measure supporting the advancement of real enterprises, with discernible policy spill-over effects on corporate asset allocation. This paper empirically examines the impact of tax reduction on the financialization of real enterprises, utilizing data from Chinese listed companies spanning the years 2009 to 2016 and anchored in the policy shock induced by the “VAT Reform”. The findings suggest that the tax reduction effect resulting from the “VAT Reform” significantly suppresses the financialization of real enterprises, with this policy effect gradually diminishing from the third year onward. Further heterogeneity analysis reveals that tax reduction exerts a more pronounced impact in curbing the intensity of corporate financialization, particularly in private enterprises and companies facing higher financial constraints. Subdividing the term structure of financial assets indicates a significant reduction in the allocation of long-term financial assets for both state-owned and private enterprises. Remarkably, state-owned enterprises show no significant change in the allocation of short-term financial assets, while private enterprises witness a substantial increase in short-term financial asset allocation. Further tests validate the conclusion that increased investment in operating assets by enterprises supports the established impact. The research enriches the literature on corporate financialization, offering a novel evaluative perspective for assessing the effects of the “VAT Reform” policy.

Gender Equality and the Risk Assessment of Corporate Financialization: An Analysis of the Increase in the Proportion of Female Executives

This paper empirically investigates the impact of the proportion of female executives on the financialization of enterprises using a sample of listed companies in the Shanghai and Shenzhen stock markets from 2009-2018. Previous studies tend to conclude that female executives are risk averse, preventing firms from participating in high-risk financial investments. However, the results of this paper show that there is a positive relationship between the proportion of female executives and the degree of corporate financialization, with an increase of 1 percent in the proportion of female executives leading to an increase of 3.8 percent in the degree of corporate financialization. Further tests show that gender inequality is a possible mechanism influencing female executives’ financial investment preferences in the unique gender culture context of China. This paper expands the research on the impact of non-institutional factors on corporate financialization, and also points out that unilaterally pursuing an increase in the proportion of female executives does not reduce the risk of corporate financialization, and that only an overall increase in the proportion of female executives can reduce the risk of corporate financialization. Improving gender equality at the social level can fundamentally reflect women’s risk aversion characteristics and encourage enterprises to make more stable investment decisions.

Financialization of Non-Financial Enterprises, Corporate Innovation and Internal Control

Financialization of Non-Financial Enterprises, Corporate Innovation and Internal Control

Research on the impact of financialization of physical enterprises on enterprise value

Research on the impact of financialization of physical enterprises on enterprise value

Influence of financialization on the business activity of non-financial enterprises in Poland

Motivation: Financialization is connected with the phenomenon of dominance of the financial sphere in relation to the real sphere. Financialization, when applied to non-financial entities, means the increase of importance of financial motives in the decision-making processes of enterprises. Changes result from transformations of the system of economic incentives and development patterns, both in the economy and among economic entities, which are focused on fast earning. Enterprises for that purpose, they use leverage and financial instruments to generate profit, limiting the operational and investment activity.Aim: The aim of this paper is to examine if the processes of financialization have affected the activities of non-financial enterprises operating in Poland based on a multifaceted analysis of the financialization of enterprises: from the point of view of investment activities (assets), sources of external financing (liabilities), income and management. Moreover, an attempt was made to answer the question if these processes apply equally to particular industries and enterprises according to their size.Results: The conducted research showed that non-financial enterprises operating in Poland do not show signs of financialization of their activities. There is a noticeable upward trend in active and passive financial instruments of the balance sheet total. However, it does not translate into an increase in financial income. Research related to factors affecting ROE as a measure of shareholder value assessment, showed that it is determined by operating performance. In addition, the research showed that there were no statistically significant differences in the financialization of operations between large companies and the SME sector. With regard to sectors, the research indicated that there were sectors that differed from the others. In terms of the degree of financialization of assets, liabilities and income, it is sector L — “Real estate activities”.

Can digital transformation reduce corporate stock price crashes?

Purpose The purpose of this paper is to study the impact of enterprises’ digital transformation on the risk of stock price crashes, but also to study the mediating role of enterprises’ financialization and accounting conservatism in the enterprises’ digital transformation on stock price crash risk. Design/methodology/approach Based on the data of 2,599 listed companies in China from 2010 to 2019, this paper constructs indicators of enterprise digital transformation through word frequency analysis method, and uses fixed-effects model and mediated-effects model to explore the impact and mechanism of enterprise digital transformation on the stock price crash risk. Findings This study shows that firms’ digital transformation reduces the risk of stock price crashes and that financialization of firms and accounting conservatism play a significant mediating effect between enterprises’ digital transformation and the risk of stock price crashes. Originality/value This study enriches the study of stock price crash risk by including digital transformation in the field of stock price crash research, and it examines the mediating roles of financialization of enterprises and accounting conservatism, which provides a new explanatory mechanism to the study of the correlation between digital transformation of enterprises and the risk of stock price crash.

Financialization and the upgrading of export enterprises:A global value chain perspective

ABSTRACTIn recent years, the financialization of enterprises has been increasing. The impact of financialization on exporters’ upgrading was studied in this article from a global value chain (GVC) perspective with the data of listed companies from 2007 to 2013. A remarkable negative impact is found from financialization on firms’ export upgrading in our paper. And it also provides helpful insights for enhancing export competitiveness.

Customer Relationship and Corporate Financial Asset Allocation: Evidence from China

Currently, the government regards preventing the risk of the real economy “de-realizing and virtualizing” as the main part of the economic work, in order to prevent the market risk brought by the excessive financialization of enterprises. This paper selects the A-share listed companies in China from 2008 to 2021 as the research sample data, and explores the impact mechanism of customer concentration on the financial asset allocation of enterprises, and the samples have passed the robustness and endogeneity tests to ensure the reliability of the benchmark regression results. The study finds that customer concentration has a significant inhibitory effect on the financial asset allocation of enterprises, and the results are more significant under the conditions of high earnings management, high financing constraints and low inventory turnover. Further, the study results show that customer concentration has a more significant inhibitory effect on the short-term allocation of financial resources by enterprises. This paper not only provides a theoretical basis for the study of the relationship between customer relations and corporate financial asset allocation, but also helps to clarify the dilemma of how the real economy and the virtual economy coexist and develop, and provides policy implications for preventing the market system reform of “de-realizing and virtualizing”.

Impact of Economic Policy Uncertainty on the Financialization of Firms: Evidence from China

This paper aims to explore the impact of economic policy uncertainty on the degree of financialization of enterprises. Taking the A-share listed companies in Shenzhen and Shanghai from 2003 to 2022 as an example, the research shows that economic policy uncertainty has a promoting effect on the financialization trend of enterprises. Economic policy uncertainty significantly increases the proportion of financial asset investment of real enterprises, aggravates the financialization trend of enterprises, and produces the worry of industrial hollowing out. To restrain the process of enterprise "from real to virtual", this paper puts forward corresponding solutions from the level of state and enterprise.

Preventive regulation and corporate financialization: Evidence from China Securities Regulatory Commission's random inspections

This study takes CSRC's (China Securities Regulatory Commission) random inspection as a quasi-natural experiment, employs a sample of Chinese A-share listed firms from 2007 to 2021, and tests the impact of a preventive regulation on firms' financialization using a difference-in-differences model (DID). We found that CSRC's random inspection significantly reduces the financialization of entity enterprises, especially over financialization. The mechanism test shows that random inspection can reduce the firms' financialization through two paths: the resource effect, which alleviate financing constraints, and the governance effect, which restrain agency costs and earnings management. Further analysis shows that the mitigating role of the CSRC's random inspection is especially prominent for enterprises faced with more efficient securities regulation, more serious media pressure or executives lack of financial background. Moreover, the CSRC's random inspection have a regional spillover effect. In the economic consequences test, we found that firms' financialization reduces long-term value-creating activities such as R&D investment, innovation output and main business performance, while CSRC's random inspection mitigate such adverse effects. These findings enrich not only the research related to financialization in emerging economies, but also provide meaningful implications for the current securities regulatory system reform in China and other countries in which have implemented or are going to implement the preventive regulatory.

A study of the impact of financialization of enterprises on their innovative capacity

Based on the financial data of A-share non-financial listed enterprises from 2007 to 2019, this paper empirically examines the impact of corporate financialization on the innovation ability of enterprises. It is found that corporate financialization will have an inhibitory effect on the innovation ability of enterprises. Through further research, it can be seen that corporate financialization of non-state-owned enterprises has a more obvious inhibitory effect on the innovation ability of enterprises, and the inhibitory effect of financialization on the innovation ability of low-competitive industries is more obvious than that of high-competitive industries. The study concludes that non-financial enterprises should focus on improving their own innovation ability to achieve long-term development rather than seeking short-term profits by financializing a large amount of their assets through corporate financialization.