Study On The Relationship Between Market Pricing Efficiency And Being Diverted From Real Economy ——Based On Firms' Stock Mispricing And Financialization Behavior

The fundamental role of finance is to serve real economy.As the core of modern economy,financial development is vital to firms'existence,and can provide tools of liquidity management for the enterprises.On the one hand,with the expansion of financial market scale and perfection of financial system,financial development plays increasingly more important role for national economy;on the other hand,with the increase in the pricing efficiency and investors' rewards from firms'operational profits,the tendency of financialization behavior prevails in the recent years.Non-financial firms enter into financial market,purchase stocks,bonds and invest in real-estate.Many scholars worries about the trend of being diverted from real economy.How to better coordinate development of capital market and real economy,and make better use of capital market to serve real economy is the main problem to be solved.According to Efficient Market Hypothesis(EMH),in the long term,the increase in pricing efficiency may play the guidance role for the firms' investment and financing,and can also reduce firms'financing cost,enhance firms'financing channels,and increase investment efficiency through the markets'barometer function.However,under the circumstances of information asymmetry,decline in operational profit margin and increase in financial investment profit margin may lead to firms reallocation of funds from real sectors to financial sectors.Meanwhile,under the pressure of profit margin and stock price crash,firms pay more attention to stable income investment as a way to stabilize stock prices and own profits.Does the increase in pricing efficiency restrain firms' financial investment behavior,which may in turn restrain the tendency of being diverted from real economy?What's the embedded channel?The paper uses the sample of A-share open-listed companies ranging over the period of year 2009 to 2018,and uses two kinds of mispricing index(accrual mispricing induced by managerial earning manipulation,and valuation mispricing induced by irrational sentiment)to analyze the impact of mispricing on firms'financial investment.Moreover,the paper also analyzes whether the impact above can aggregate or alleviate the tendency of firms' being diverted from real economy.Results find that:Firstly,financialization behavior has the characteristic of being diverted from real economy,which may be indicated by the "squeeze-out" effect on firms real investment.Firms' financial investment may lead to decline in capital expenditure ratio,decline in TFP as well as increase in the proportion of financial investment profit to total profit.Although short-term financial investment alone cannot play the negative effect on TFP and long-term investment,maturity mismatching in the long-term loan may also lead to firms' being diverted from real economy as long-term loan intensity exceeds certain level.Secondly,with the shareholders'orientation,decline in positive accrual mispricing may leads to firms' investment in fixed-income financial assets as a way to stabilize earning distribution and stock price.Agency problem also exists in the financialization behavior induced by market efficiency,as the firms tend to disguise accrual earning decline and stabilize short-term stock market price.The increase in the major shareholders' proportion may refrain firms' financial investment behavior.Furthermore,long-term financial investment induced by earning substitution motive may lead to decline in capital expenditure ratio and TFP growth rate,which may lead to firms' being diverted from real economy.Thirdly,the increase in valuation mispricing may lead to the increase in short-term financial investment due to the lack of pricing information and catering effect,and may also lead to expansion of capital inflow.Under positive valuation mispricing,the over-inflow of long-term credit may aggrevate maturity mismatching.On the one hand,the increase in pricing efficiency may restrain firms' short-term financial investment;on the other hand,the increase in pricing efficiency may also cut off the relationship between of valuation mispricing and short-term financial investment.External supervision may strengthen the effect above.Furthermore,valuation mispricing may alleviate the "squeezing-out" effect induced by financial investment,but can also aggravate the negative effect on firms' TFP.Fourthly,the paper uses the promulgation of Margin Trading Mechanism as an external policy shock to make DID analysis.The firms tends to increase long-term financial investment after joining into Margin Trading samples,but has no incentives to increase short-term investment.Margin Trading can decrease positive accrual mispricing,which in turn lead to expansion of long-term financial investment under market pressure.Margin Trading can also decrease positive valuation mispricing,which may in turn restrain short-term financial investment under goverment mechanism.Strategically speaking,Margin Trading can also make firms become more conservative,which may substitute long-term financial investment for R?D investment as a way to gain stable income.Furthermore,the substituted behavior can also lead to lower capital expenditure ratio and long-term TFP.The possible marginal contribution of the paper is as follows:Firstly,the paper expands current literature in terms of capital market function.Current literature mainly focuses on the imbalance between investment and financial function of the stock market from the perspective of system building,institutional investors,speculative behaviors and pricing mechanism,but rarely focuses on the relationship between capital market development and its connection with the real economy.The paper points out double-edged characteristics of market system,which may restrain short-term speculative behavior as well as increase long-term financial investment.Better external supervision and information transformation mechanism should be carried out in order to avoid other earning manipulation ways.Secondly,the paper enriches the analysis of motives of firms' financial investment.Current literature mainly focuses on squeezing-out effect induced by long-term financial investment and subsequent squeezing out of real investment.The paper points out that long-term financial investment induced by lower accrual mispricing,and short-term financial investment induced by higher valuation mispricing,may also lead to firms' being diverted from real economy.Thirdly,the paper enriches empirical analysis of EMH and catering theory,and analysis whether the increase in pricing efficiency can improve real economy from the relationship between market efficiency and real economy development.The paper also enriches the motives and results of catering effect from the perspective of behavioral finance,and enriches empirical evidence of catering theory and market-timing theory.Fourthly,the paper makes further analysis of double-edged effect of short-selling mechanism.Current literature mainly focus on the deterrent effect beforehand and governance effect afterward,which may deter firms' violation and earning manipulation incentives.The paper proposes pressure effect as a way to explain firms'financial investment induced by higher market pricing efficiency.