Urban Housing Prices?Corporate Financialization And Total Factor Productivity

As the 14 th Five-Year Plan of China clearly states,balance must be promoted among finance,real estate and entity economy.China's economy will grow sustainably and with quality as long as the real economy develops well.China's economy is widely perceived to have moved toward the "new normal," and the problem of shifting “from real to virtual” has become serious lately."Financialization" is gradually drawing domestic and international attention.Corporate financialization is a micro unit of economic financialization,and an obvious signal of shifting “from real to virtual.” Therefore,the comprehension of the causes of financialization and its economic consequences from both macro environment and micro motives is of great practical significance and policy implications to prevent excessive corporate financialization.In this context,Firstly,we study the factors impact the financialization of nonfinancial firms through the view of housing prices and clarify the relation of urban housing prices and the corporate financialization,as well as the mechanism.Second,we examine the impact of firms' financialization on total factor productivity from the perspective of economic consequences,and explain the channels based on two perspectives: cash holding and innovation.Third,based on corporate self-selection,moreover we investigate the consequence of corporate financialization based on the productivity and explore the relationship between housing prices,overfinancialization,and productivity comprehensively.This paper includes seven main parts as follows:The first chapter reviews the current situation and developments in the research field in China and abroad;summarizes the existing research deficiencies and shortcomings.In chapter 2 we summarize and review the existing studies to gain comprehensive understanding of the present situation of the research topic of this study.The third chapter focus mainly on the effection of housing market on its upstream and downstream industrial chains through relevant financial data.It analyzes the feature of China's financial products to illustrate the deep impact of real estate markets on financial products.We then determine the characteristics of the correlation between housing price cycles and relevant financial policies based on China's institutional background.Combined with China's unique real estate market,we offer a preliminary judgment on the possible trajectory of the connection of housing prices and corporate financialization,and conduct a simple data structure analysis to provide a realistic basis for the next research questions and research content.Chapter 4 reveals the causal connection of housing prices and the financialization behavior of firms.It also explores the mechanisms of housing price trends on corporate financialization.The research finds that real estate fever is one of the important reasons for the flow of capital into the virtual economy.Chapter 5 concentrates on the outcome of financialization behavior on total factor productivity based on the previous study,and aims to draw a fuller apprehend of financialization by dissecting production efficiency.Based on two levels of cash holdings and innovation inputs,we construct a panel threshold model to investigate the logical relation of financialization and TFP at different threshold intervals.The regression outcome proves a crowding-out effect and also a driving effect of the financialization behavior of non-financialized enterprises.The study in this chapter helps to objectively understand whether it is good or bad for firms to get involved in financial investment,and has important implications for firms looking to optimize their asset allocation strategies.Chapter 6 uses the marginal treatment effect analysis method to consider the self-selection problem of firms' financial investment,extracts observable and unobservable heterogeneity characteristics,categorically explores the role of firms with different degrees of financialization choices on total factor productivity,and explains the causal correlation between housing price trends,excessive financialization of firms,and TFP.We also employ counterfactual analysis to compare and analyze the impact of financialization on the differential role of TFP by simulating three virtual change scenarios of housing prices.Chapter 7: The last part summarizes the main findings of the thesis.The policy implications of this paper are put forward in the context of the effectiveness of house price regulation,the strengthening of institutional mechanisms to guarantee the development of the entity economy.Shortage of this thesis and extensions of the future work are also discussed.This study offers four innovations.First,this study identifies the causal relationship between the impacts of non-financial asset price changes on firms' financialization behavior,which complements the perspective that the real estate market environment affects firms' financialization.This study thus expands the research horizon to some extent.Second,this study explains the mechanism of housing price trends in corporate financialization at three levels: investment opportunities,financing constraints,and surplus management motives.By comparing the explanatory strength of the financialization behavior of firms when investment opportunities and financing constraints are superimposed,this study provides an in-depth extension of the research on the related mechanisms.Third,we construct a panel threshold model to investigate the dual relation of financialization and TFP in different threshold zones from the level of cash holdings and innovation inputs,which expands the research perspective.Fourth,existing studies set the effect of firms' financialization behavior as homogeneous,ignoring the unobservable characteristics of firms on their financialization decisions.This study quantitatively measures the two treatment effects of whether firms over-financialize their behavior on total factor productivity by integrating the selection effects of firms' financialization behavior into the economic context of exogenous shocks to housing prices through a heterogeneous marginal treatment effects approach.This,to some extent,bridges the gap in existing studies.