The Research On Financialization Of China'S Entity Enterprises And Its Effects

As China's economy enters a critical period of industrial transformation and upgrading,some capitals in the real economy sector are “leading to the virtual”(ie,financial asset investment or financialization),such as the investment of stocks,trust funds,derivative financial instruments,bonds,wealth management products and investment real estate,which will pose a potential threat to the long-term development of China's real economy.Therefore,at this stage,the structural imbalance between financial assets and operating assets has gradually become an important issue for the healthy development of Chinese entities.Then,in the critical period of China's economic transformation,what are the important factors that drive Chinese entities to actively participate in the investment of financial assets(ie,financialization)? Does the financialization of the entity have a significant impact on the investment in physical capital? And does it also have a significant impact on its innovation investment? In addition,as a follower of maximizing profit,is financialization beneficial to the maximization of the value of the entity? And,what kind of mechanism does it effect? Obviously,these important and realistic issues need to be answered.In theory,for an entity,the impact of financial assets on the enterprise development is difficult to determine relative to other operating assets.The role of financial assets in the operation of entity has not been agreed.In view of this,the paper uses the empirical evidence of Chinese listed entities(2008-2015)to systematically explore the causes and consequences of financialization in entities from the logical relationship chain of “basic status-participation motivation-economic effect-corporate value”.Firstly,this paper explores the driving factors of Chinese listed entities' participation in financial asset allocation investment from the macro and micro level,and analyzes the effect of macro factors on the relationship between micro-driven factors and the allocation of financial assets,and further studies the differences indifferent enterprises(non-state-owned enterprises,local state-owned enterprises and central state-owned enterprises),regions(three regions in East,Central and West)and different financial assets.The conclusions of the study show that,different from the some scholars,the participation of China's entity enterprises in financialization is a kind of “reservoir” behavior from a macro perspective,and the allocation of financial assets is a kind of “first aid” behavior,which can buffer the negative impact of the decline in the performance of the main industry and the dilemma of financing constraints on the healthy development of enterprises.Therefore,on the whole,the participation of China's entity enterprises in financialization is an act of optimizing the efficiency of resource allocation.In addition,there is a big difference about“reservoir” behavior in different enterprises(non-state-owned enterprises,local state-owned enterprises and central state-owned enterprises),regions(three regions in East,Middle and West)and different financial assets..This is because of the distortion of the allocation of credit resources in the financial market and the process of regional marketization reform in China.As a result,how to promote market-oriented reforms into a deeper level has become an important direction of economic reform.Secondly,this paper examines the economic effects of participating in financial investment from the perspective of physical capital investment of China's entity enterprises,and analyzes the moderating effect of macro-micro factors on the impact of financialization on corporate physical capital investment.This paper analyzes the impact of financial participation on the efficiency of Chinese enterprises' physical capital investment for the first time,and breaks through the existing research“investment overall level” framework.It analyzes the economic benefits of corporate financialization from the perspective of investment efficiency and enriches the literature on corporate financialization research.The study finds that financialization in China's entity enterprises has indeed reduced the scale of China's physical capital investment,which is consistent with the research of existing scholars.However,this paper also finds that financialization of entity enterprises in China has improved the investment efficiency of enterprise capital,which is embodied in the fact that financialization suppresses the overinvestment,but does not had a significant impacton the underinvestment,and the above phenomena are mainly reflected in non-state-owned enterprises and enterprises in the middle and western regions.Therefore,this paper believes that although financialization reduces the level of capital investment of entities,the negative impact is mainly reflected in the reduction of overinvestment in enterprises.It means that at this stage,financialization in China's entity enterprises is a positive market strategy,that is,the “capital” occupied by overinvestment is used to allocate financial assets.Thirdly,while examining the impact of financialization on the innovation investment of entities,this paper further analyzes the impact of financial behaviors on corporate innovation investment under different motives,and based on China's unique institutional environment,it discusses the difference about the relationship in different institutional environments.The study found that the higher the degree of financial participation of enterprises,that is,the larger the scale of financial assets,the higher the level of investment in technological innovation of enterprises,which means that the investment of enterprises in financial markets stimulates the willingness of enterprises to invest in technological innovation,the investment intensity of technological innovation has been improved.Compared with enterprises with serious financing constraints,the financial behavior has more obvious influence on the innovation investment of enterprises.The institutional environment and the nature of property rights are important factors affecting the relationship between financialization and innovation investment.That is,in local state-owned enterprises and enterprises in the middle region,the positive effect of financialization on innovation investment is more significant,and the more interesting discovery is that long-term stable financial assets can promote the innovative investment of entities,while short-term transactions financial assets inhibit the innovation investment of entities.Finally,this paper mainly studies the influence of financialization on corporate value from the perspective of enterprise marketization value,and explores the moderating effect of macro-micro factors in the relationship between financialization and corporate value,and based on the physical capital and technological innovationinvestment further analyze the intermediary path of the impact of financialization on corporate value.The study found that the higher the level of financial assets,the higher the current market value of the enterprise,and the higher the future market value of the enterprise.The cross-term of the profit rate of the main business and the degree of financialization is significantly negatively correlated with the market value of the enterprise,that is when the profitability of the main business of the enterprise is better,the enterprise's participation in financial asset investment(increasing the degree of financialization)is more likely to be a “profit-oriented' behavior,thereby reducing the market value of the enterprise.There is a significant positive correlation between the cross-term of the financing constraints and the degree of financialization and the market value of the enterprise.That is,the more serious the financing constraint is,the more effectively the enterprise participates in the financial investment improves the value level of the enterprise.This indicates that the enterprise allocates financial assets to alleviate the financing constraints,thus it is conducive to the improvement of enterprise value.Physical capital investment and innovative R&D investment are some intermediate factors that financialization influenceS the value of enterprises,that is,participating in financialization improves the investment efficiency of enterprises and the level of investment in technological innovation,thereby improvs the short-term and long-term market value of enterprises.Generally speaking,different from the existing literature which is limited to a certain level factor to examine the motives of corporate financialization,this paper comprehensively considers the macroeconomic policy and micro financial characteristics to find the motive of enterprise financialization,and analyzes the interaction effect of macro and micro factors on the financial behavior of enterprises,which is more conducive to comprehensively grasping and capturing the motives of enterprises' participation in financialization,and enriching and expanding the perspectives of related research in financialization motivation.Moreover,breaking through the existing research focuses on the level of investment,this paper analyzes the impact of participation in financial investment on the total amount of physical capital investment from the perspective of investment efficiency,and further studiesthe effect of financialization on the efficiency of corporate capital investment(overinvestment and underinvestment),which expands the research perspective of the economic benefits of financialization.Actually,the study is not only conducive to our correct analysis of the behavior of financialization in China's entity enterprises at this stage,but also has important implications for government to formulate and implement relevant economic policies.