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MOTIVATIONS AND ECONOMIC CONSEQUENCES OF CORPORATE FINANCIALIZATION: EVIDENCE FROM CHINESE LISTED NON-FINANCIAL COMPANIES
Zhou, Lan
Zhou, Lan
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Thesis/Dissertation
Date
2025-05
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Global Finance
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https://doi.org/10.34944/9kfk-bp09
Abstract
The increasing trend of financialization in Chinese listed firms has drawn attention from the academic community. This paper is based on the financial data of 2,154 nonfinancial and non-real estate listed companies from 2008 to 2018 and aim to investigate the driving factors and economic consequences of corporate financialization in Chinese capital market. The results show that corporate financialization in China is influenced by motives such as preventive savings, investment substitution, shadow banking, and earnings management. The latter three motives are more pronounced than preventive savings, suggesting a speculative nature to the financialization trend, which separates these companies from the real economy's development. In terms of economic consequences, financialization tends to displace primary business activities, particularly in corporate research and development (R&D) investments. Over the long term, this may lead to insufficient incentives for corporate innovation and development, gradually weakening their competitive edge. Therefore, it is crucial to focus on supporting the real economy, enhancing financial supervision, and guiding companies to stay aligned with their intended objectives to prevent excessive financialization.
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