Confucian Culture And Investment Behavior Of Microeconomic Subjects

The introduction of cultural factors into economics has become more and more popular,promoting the development of cultural economics.Engaging cultural factors into economics extends the scope of economics,and helps to make up for the shortcomings of neoclassical market model.Confucian culture is the mainstream of Chinese traditional culture,and its influence of on Chinese economy is a subject worthy of study.Compared with macro research,studying the impact of culture on financial and economic behavior from a micro perspective can provide more detailed evidence and clear logic.This dissertation selects household’s financial investment,financialization of non-financial company and over-investment as the entry point,to explore the specific influence of Confucian culture on microeconomic subjects.Research on households’ risky financial investment shows that Confucian culture has an inhibiting effect on family participation in the risky financial market,reflecting the conservatism of Confucian culture.This inhibition is not significant for families with a low number of real estate and families surrounded by a low density of financial institutions.At the same time,the younger head of the household and the higher education level of the family weaken this inhibition to a certain extent.Further analysis of the economic mechanism shows that Confucian culture will indirectly affect the family’s participation in the risky financial market by influencing the family’s risk preference,the acquisition of financial knowledge,and the probability of purchasing commercial medical insurance.The empirical research in Chapter V shows that Confucian culture will reduce the degree of financialization of non-financial company.This result reveals that Confucian culture mainly plays a role described as weakening "speculative motives"when affecting the degree of financialization.In addition,Western culture,financing constraints,aggregate money supply and the age of company can moderate the influence of Confucian culture on financialization.The analysis of the economic consequences of the financialization of China’s non-financial companies shows that their financialization has brought certain financial gains,but at the cost of damaging the operation of the entity,which is not conducive to the improvement of the companies’ overall profitability.Based on the research on Confucian culture and financialization,this paper further pays attention to the influence of Confucian culture on the investment efficiency of non-financial company.It is found that Confucian culture promotes"over-investment of free cash flow".Under the influence of Confucian culture,non-financial company focuses more on entity investment,which causes companies with abundant free cash flow tend to direct free cash flow to over-investment.Those companies lack of free cash flow will obtain disposable funds through external financing,and the inflow of external funds makes it possible for companies to conduct over-investment.Nevertheless,external financing introduces the fund provider’s monitoring to the fund demander,which helps to mitigate the Confucian culture’s promotion of "over-investment of free cash flow".The main marginal contribution of this paper is to introduce Confucian culture,at a micro perspective,to explore the impact of culture on the investment behavior of two important microeconomic entities,household and enterprise.The focus of this paper is to examine the subjective investment preferences of micro-subjects,including the risk preference of investing on financial assets,the trade-off between financial asset investment and real asset investment,and to further analyze the performance of investment behavior under the influence of subjective preferences.Then,this paper pay attention to the results of investment choices,as well as the cultural impact on household financial asset allocation and the performance of enterprises on asset holdings,and the resulting economic impact on micro-subjects.As far as the content involved in this paper,Confucian culture is a coin of two sides.Its relatively conservative cultural characteristics may cause Chinese families miss the rational use of financial markets in China’s high-speed economic growth stage to create further wealth appreciation.But at the same time,to a certain extent,it guides non-financial enterprises to focus on real investment.However,focusing on real investment does not imply a reasonable level of real investment in entity business.The research in this paper reveals that Confucian culture can exacerbate the phenomenon of"over-investment of free cash flow".Too much is not better than too little,Confucianism advocates "moderate mean"(ZhongYong).But in the field of business management and investment,it is not easy to get it right.The research in this paper provides richer evidence for the substantial impact of culture on the economy,and the relationship of Confucian culture and the investment behavior of microeconomic entities deepens the understanding of how individual or collective preferences,under the influence of macro-cultural contexts,affect micro-investment behavior.All of this reminds us that the behavioral decisions of the subjects participating in economic activities are not only affected by "pure" economic variables,but also the socio-cultural psychological structure.The investment behavior of microeconomic subjects relates to household asset allocation,wealth appreciation,corporate profitability,and investment efficiency,which will further affect the development of the financial market and economic growth at the macro level.Although Confucian culture no longer serves as the mainstream ideology in modern China,its long history and rich connotation endow Confucianism with strong vitality and extensive influence.Culture can hardly be altered by human will,and the values and concepts that the public hold often originate from the local culture.The influence of Confucian culture on the micro-subjects’investment behavior is only a partial picture of the extensive influence of Confucian culture on the Chinese economy.On the one hand,the discussion of this issue has enhanced our understanding of the economic effects of Confucian culture,and on the other hand,it can also provide some insight for the study of cultural economics in China.I hope what I have tried in this dissertation will help to better understand the relationship between culture and economy,finally to obtain comprehensive knowledge about China’s economic reality.