Characteristics Of Top Management Team And Financialization Of Entity Enterprises

At present,China's economy is in a critical period of shifting economic growth rate,painful structural adjustment and slowly digestion of the "four trillion" economic stimulus policy.In the new normal state of "three-phase superposition",the "hot" virtual economy and the "cold" real economy are one of the most prominent structural contradictions in the current stage.On the one hand,the development of the real economy,especially the basic industrial sectors such as manufacturing and heavy industry,is facing unprecedented pressures and risks,the core competitiveness of products is insufficient,and the return on investment,labor productivity growth and total factor productivity are showing a downward trend.On the other hand,in sharp contrast to the real economy,the financial and real estate industries have shown a clear countercyclical upward trend.Driven by the motive of capital for profit,many non-financial entitiy emterprises have obtained large amounts of financial assets or investment real estate in their balance sheets to obtain high returns.The phenomenon of financialization of entity enterprises(FEE)has become a popular trend in the development of the real economy in China.The imbalance in the allocation structure of financial assets and operating assets has gradually become an important feature fact faced by the development of China's physical enterprises.Aiming at the phenomenon of financialization of China's entity enterprises,scholars have carried out extensive research and discussion.The existing research literature has mainly conducted a lot of useful explorations from the intrinsic motivation and economic consequences of entity enterprises financialization,and formed a contention and collision of multiple views.As we all know,Top management team(TMT)is at the core of the enterprise and has a strong influence on the formulation and implementation of corporate strategies.TMT has the strategic decision-making power and management right of the enterprise,is responsible for the economic benefits of the enterprise and undertakes greater decision-making risks,and can adjust corporate strategy and corporate resource allocation based on environmental changes.This leads to a series of thoughts: In the new normal state of the "three-phase superposition" of China's economy,what is the status of financialization of China's entity enterprises? What are the factors driving the substantial increase in the scale of financial asset allocation for China's entity enterprises? What role does TMT play in financialization decisions of entity enterprises? Regrettably,there are relatively few existing studies on the influencing factors of FEE,and most of them are mainly based on the classical assumption of "homogeneous rational people".However,according to Upper Echelon Perspective theory and behavioral finance theory,TMT's members are not completely homogeneous and rational economic people,but there are heterogeneity and irrational elements caused by cognitive bias.Therefore,in order to remedy the above research defects,this paper considers top managers as "irrational people" with "heterogeneity".Based on the dual perspectives of homogeneity and heterogeneity of TMT's background characteristics,this paper studies the influence of TMT's background characteristic on the financial decision-making of entity enterprises,such as characteristics of gender,age,tenure and background of education,financial,overseas and political,and the influence mechanism of TMT's background characteristic on the financial decision-making of entity enterprises by affecting behavior characteristics.Combining the facts of the financialization of China's entity enterprises,this paper attempts to study the relationship between TMT's characteristics and FEE,with a view to helping to improve and enrich the relevant pre-factor theory of FEE,providing micro-evidence for the phenomenon of "industrial hollowing" and "financialization of entity sector" in the current economic operation,promoting the improvement of corporate governance,helping government to formulate relevant policies to guide financial market to better serve real economy,and eventually realizing the transformation of economic operation from virtual to reality and healthy economic development.This paper reviews in detail the relevant literature and basic theories related to financialization of entity enterprises,TMT's background and behavioral characteristics,and explore the relationship between TMT's characteristics and FEE from multiple dimensions by defining related concepts.Firstly,the current status and differences of FEE are analyzed and compared in many aspects.Secondly,the influence of TMT's background characteristics on financialization decision of entity enterprise is empirically tested from seven aspects: gender,age,tenure,education,finance,overseas and politics.Finally,influence mechanism of TMT's background characteristics on FEE is studied from TMT's behavioral characteristics including overconfidence and risk-preference.Research result indicates:TMT's background characteristics have an important impact on FEE.The listed company managed by TMT with fewer males and higher gender heterogeneity is more motivated to allocate financial assets.As average age grows,TMT is more willing to choose to hold lower risk financial assets when operating and managing the company.The longer the average tenure and the higher tenure heterogeneous,the more stable TMT is,and the easier it is to reach consistent financial investment decisions.TMT's background of education,Finance and overseas are positively related to FEE,but their heterogeneity has inhibited TMT's enthusiasm for allocating financial assets to varying degrees.The higher the average education level,the higher the proportion of financial and overseas background,the stronger is the TMT's willingness to allocate financial assets,resulting in a higher proportion of holding financial assets.The close government-enterprise relationship brings entity enterprises with resource advantages and strict external supervision.Better financing facilities,lower financing constraints,strict supervision,and high risks of financial assets have collectively inhibited the enthusiasm of TMT for allocating financial assets.The higher proportion of male executives,the more overconfidence TMT has.However,the greater gender heterogeneity can inhibit the proportion of financial asset allocation,because female executives usually have a wealth of management education background and financial work experience,and the higher position in TMT weakens the financial investment decisions of male executives by obscuring their overconfidence.The influence of TMT's age characteristics on FEE presents complex and contradictory characteristics,because the increase in TMT's average age not only brings rich corporate management experience,but also may bring emotional conflicts within TMT,which conflicting aspects together lead to TMT's preference to allocate low-risk financial assets.With longer average tenure,higher education,financial and overseas background,TMT is easier to present overconfidence,that is,an overconfident TMT for entity enterprises usually has more radical financialization decisions and stronger willingness to allocate financial assets or holds a higher proportion of financial assets.TMT with a political background shows overconfidence in behavior characteristics,but it is negative in financial investment decisions,because the closely related government-enterprise relationship enhances TMT's overconfidence,but too strict external supervision has made TMT more cautious and conservative in allocation of financial assets for self-interest motive.TMT's risk preference is also higher when the proportion of male executives is higher.However,the larger gender heterogeneity easily obscures TMT's risk preference,weakens financial investment decisions of male executives,and inhibits the allocation of corporate financial assets.The influence of TMT's age characteristics on FEE presents a more contradictory side.With increase of TMT's average age,rich corporate management experience has increased TMT's enthusiasm to allocate financial assets,but emotional conflicts within TMT have masked of risk preference,which not only inhibited the growth rate of FEE,but may also lead to TMT's preference to allocate low-risk financial assets.With longer average tenure,higher education,financial and overseas background,TMT is easier to present risk preference,that is,TMT of risk-appetite for entity enterprises usually has more radical financialization decisions and stronger willingness to allocate financial assets or holds a higher proportion of financial assets.TMT with a political background shows willingness of risk-taking in behavior characteristics.However,it is negative in financial investment decisions,because the closely related government-enterprise relationship enhances TMT's the degree of risk preference,but excessively strict external supervision has made TMT more cautious and become more conservative in allocation of financial assets for self-interest motive.The research contributions of this paper are mainly reflected in the following three aspects: First,combining FEE with TMT's characteristics on the basis of theoretical analysis,this paper studies the effect and mechanism of TMT's characteristics(background and behavioral characteristics)affecting FEE and deepen relevant pre-factor theory on FEE,which is a theoretical innovation of this paper and systematically complements the relationship between TMT's characteristics and FEE.Second,combining the latest theory research findings of Upper Echelon Perspective and behavioral finance,when studying the relationship between TMT's characteristics and FEE,this paper discarded the traditional assumption of "homogeneous rational people" and adopted a new analysis framework based on the perspective of "heterogeneous irrational people".Third,according to Upper Echelon Perspective theory and behavioral finance theory,the paper decomposed TMT's characteristics into background and behavior characteristics.Theoretical analysis shows that the background characteristics of TMT affect behavior characteristics,and further affect investment decision of FEE.Therefore,the research on transmission and influence mechanism of TMT's background characteristics affecting FEE is also one of important contributions of this paper.In summary,from micro-perspective of financialization,China's listed comamies are more willing to financialize and gradually increasing their degree of financialization.As the leader and controller of the company's operation,TMT's background characteristics have an important influence on the decision of FEE.In the process of TMT's background characteristics affecting FEE,the two behavioral characteristics of overconfidence and risk preference play important mediating pathway and transmission role.The research conclusions can improve and enrich the relevant pre-factor theories of FEE,promote the improvement of corporate governance by optimizing internal structure of TMT,help the government to formulate relevant policies to effectively prevent and resolve systemic financial risk,guide financial markets to better serve real economy,and eventually realize the healthy development of economic operations.