External Governance And Financialization Of Real Enterprises

In recent years,the economy “from entity to virtual” has become a hot topic of widespread concern in the society.The “from entity to virtual” of the economy is mainly manifested in the fact that finance has separated from the source of serving the real economy and allocated capital to the financial system,resulting in excessive self circulation and self expansion of capital.On the micro level,the “from entity to virtual” of the economy is manifested as the financialization of entity enterprises,that is,entity enterprises gradually deviate from their main business and put more capital into the financial market.The excessive financialization of entity enterprises is likely to cause the phenomenon of false prosperity of the economy,which will lead to financial crisis.Therefore,it is of great practical significance to discuss the influencing factors and the mechanism of the entity enterprise’s financialization,and put forward targeted countermeasures and suggestions to prevent the excessive financialization of the entity enterprise,and guide finance to better serve the entity economy and return the entity enterprise to the main business,so as to realize the powerful manufacturing industry and high-quality economic development.Under the background of the deepening trend of financialization of entity enterprises,this paper systematically studies the impact of external corporate governance on financialization of entity enterprises and its mechanism.Specifically,this paper first defines the concept of external governance,and divides external governance into market governance,government governance and social governance.Then,on the basis of existing research,this paper combs the governance effects of various external governance mechanisms under market governance,government governance and social governance,and summarizes the general regular.Then,using the theoretical model to analyze the mechanism of external governance affecting financialization of enterprise.On the basis of the theoretical model deduction results,this paper makes a theoretical analysis on how corporate external governance affects corporate financialization and puts forward research hypotheses.Finally,the empirical part of this paper studies the influence of managers’ market competition(market governance),illegal supervision(government governance)and analyst coverage(social governance)on enterprise financialization and its mechanism.The detailed research work and main research conclusions are as follows:First,this paper constructs a theoretical analysis framework of external governance affecting enterprise financialization.On the one hand,this paper combs the governance effects of three types of external governance mechanisms: market,government and society,summarizes relevant regular,and puts forward general conclusions.The results show that the main governance effect of government governance mechanism is to reduce the degree of information asymmetry and strengthen external supervision.In addition to alleviating the problem of information asymmetry,the main governance effect of market governance mechanism and social governance mechanism may also increase the pressure on managers’ short-term performance.On the other hand,this paper analyzes the theories about the influence of managers’ market competition,illegal supervision and analyst coverage on enterprise financialization,and puts forward the research hypotheses.In addition,this paper uses a theoretical model to deduce the influence of managers’ market competition on the financialization of enterprises.The results of the theoretical model show that the higher the degree of competition in the manager market,the lower the degree of financialization of enterprises.Secondly,this paper takes the managers’ market competition as the representative of the market governance mechanism,and uses the data of A-share listed companies in Shanghai and Shenzhen from 2007 to 2019 to investigate the influence of managers’ market competition on enterprise financialization and its mechanism.The main research conclusions are as follows:On the whole,managers’ market competition significantly inhibits the enterprise financialization.Relevant research has found that the opening of high-speed rail has an important impact on the managers’ market competition.Therefore,this paper takes the opening of high-speed rail as a quasi natural experiment,and builds a difference-in-difference model,and examines the impact of managers’ market competition on enterprise financialization.The regression results once again verify the conclusion that managers’ market competition significantly inhibits enterprise financialization.The mechanism analysis shows that,as an external governance mechanism,managers’ market competition plays a role in supervising and encouraging managers,reducing the opportunistic behavior of managers,thus reducing enterprise financialization.In addition,this paper also finds that the influence of managers’ market competition on enterprise financialization is more significant when the level of internal governance is low and the degree of marketization is high.Thirdly,this paper takes illegal supervision as the representative of government governance mechanism,uses the data of A-share listed companies in Shanghai and Shenzhen from 2007 to 2020,takes illegal punishment as a quasi natural experiment,constructs difference-in-difference method,and explores the impact of illegal supervision on enterprise financialization and its mechanism.The main research conclusions are as follows: On the whole,illegal supervision has a significant negative impact on enterprise financialization.The mechanism test shows that information asymmetry is an important intermediary variable.Illegal supervision can play the role of “information disclosure”,reduce the degree of information asymmetry between investors and companies,reduce the opportunistic behavior of managers,and thus inhibit the financialization of enterprises.In addition,this paper also finds that,compared with companies with higher internal governance level,the governance effect of illegal supervision on enterprise financialization is more significant in companies with lower internal governance level;Compared with companies with low level of rule of law,the governance effect of illegal supervision on enterprise financialization is more significant in companies with high level of rule of law.Different types of illegal supervision have different impacts on enterprise financialization.First,the number of violations has a significant negative impact on enterprise financialization.The more violations are punished during the sample period,the lower the degree of enterprise financialization.Second,compared with criticizing or condemning these two types of punishment,listed companies that have been punished by warnings,fines or rectifications have a lower degree of financialization.Finally,this paper takes analyst coverage as the representative of social governance mechanism,using the data of A-share listed companies in Shanghai and Shenzhen from 2007 to 2020 to investigate the impact of analyst coverage on enterprise financialization and its mechanism.The main research conclusions are as follows: On the whole,analysts coverage has significantly reduced the degree of enterprise financialization.The above research conclusion is not only statistically significant,but also has significant economic significance.On average,analyst coverage adds a standard deviation,the decline of the relative indicators of enterprise financialization is equivalent to 13.74% of the sample standard deviation,and the decline of the absolute indicators of enterprise financialization is equivalent to 9.53% of the sample standard deviation.The analysis of the mechanism shows that analysts coverage reduces the degree of enterprise information asymmetry and strengthening external supervision to curb enterprise financialization.In addition,this paper also finds that the impact of analyst coverage on enterprise financialization is more significant in state-owned enterprises and listed companies with poor corporate governance.This paper also pays special attention to the impact of analysts’ own characteristics on enterprise financialization.The results show that compared with nonstar analysts,star analysts have a significant negative impact on enterprise financialization.The accuracy of analysts’ forecasts and their relative work experience have a significant negative impact on enterprise financialization.The main empirical results of this paper still have good robustness after a series of robustness analysis.This research systematically analyzes the corporate financialization behavior from the perspective of corporate external governance,which enriches the research in the field of external governance.At the same time,this paper constructs an analytical framework for the impact of external governance on corporate financialization,which provides a reference paradigm for subsequent research on the impact of external governance on corporate financialization.The findings of this paper well verify the importance of external governance in the corporate governance system,and also provide relevant basis for enterprises and regulators to prevent financial risks.