Research On The Economic Consequences Of Financial Assets Allocation Of Listed Non-financial Companies

Under the new normal economy,the real economy continues to weaken and the virtual economy continues to expand,which will lead to financialization.Non-financial listed companies ignore the sustainable development of their main business and blindly allocate financial assets,which is a manifestation of financialization.It is not only related to the sustainable development of the main business,but may also affect economic operation risks through the "systematic risk linkage mechanism",which is widely concerned by academia.The existing literature mainly focuses on the impact of financial asset allocation on the development foundation of the main business,and rarely discusses whether this impact will affect market efficiency.As the "touchstones" for the effect of investment decisions,the markets are important places to test the effectiveness of financial asset allocation and its wealth creation capability.Considering that the external markets of enterprises mainly include product market and capital market,and the performances of product market and capital market are more likely to have an impact on the adjustment of asset allocation structure,it is particularly important to investigate the economic consequences of financial asset allocation of non-financial listed companies from the perspective of product market and capital market.Based on the above considerations,and relying on the financialization theory,economic consequences theory,product market competition theory,efficient market and functional locking hypothesis and information asymmetry theory,the thesis takes the annual data of all A-share non-financial listed companies from 2007 to 2020 as samples to discuss the economic consequences of financial asset allocation from the perspective of product market and capital market.Specifically,first,since the product market performance is closely related to the operating ability of the main business,and the operation quality of the main business is related to the sustainability and predictability of operating cash flow and earnings,that is,cash flow risk and earnings persistence,the thesis studies the relationship between financial asset allocation and cash flow risk and the relationship between financial asset allocation and earnings persistence,which systematically examines the economic consequences at the product market level;second,"information transmission" and "stock price response" are the key factors of capital market operation,considering the false disclosure,market manipulation and other corporate fraud will increase the "noise" in "information transmission",and "stock price response" is mainly reflected in the usefulness of accounting information for decision-making,the thesis studies the relationship between financial asset allocation and corporate fraud and the relationship between financial asset allocation and value relevance of earnings,which systematically examines the economic consequences at the capital market level;finally,in view of the negative impact of financial asset allocation on the performances of product market and capital market,the thesis further discusses the governance of financial asset allocation.Based on the above logical framework,the research conclusions are as follows:Firstly,in terms of financial asset allocation and cash flow risk,there is a U-shaped relationship between financial asset allocation and cash flow risk;industry competition can’t significantly affect the relationship between financial asset allocation and cash flow risk,but enterprise competitive status and supply chain stability can moderate the relationship and weaken it while shifting the inflection point to the right.Further,after the exploration of the transmission path,it finds that inefficient capital allocation plays a mediating role in the process of financial asset allocation affecting cash flow risk;after distinguishing the types of financial asset allocation,the study finds that the relationship between non-strategic financial assets allocation and cash flow risk is U-shaped,and strategic financial assets allocation negatively affect cash flow risk;after considering the impact of financial leverage,financial leverage can moderate the relationship and weaken it while shifting the inflection point to the right.In terms of financial asset allocation and earnings persistence,there is a negative relationship between financial asset allocation and earnings persistence;the smaller the industry competition,the higher the enterprise competitive status or the stronger the supply chain stability,the less significant the negative impact of financial asset allocation on earnings persistence.Further,after the exploration of the transmission path,it finds that horizontal and vertical competitiveness of enterprises are the pathways for the negative relationship;after distinguishing the types of financial asset allocation,we find that non-strategic financial assets allocation contributes to the negative impact of financial asset allocation on earnings persistence;after considering the impact of earnings manipulation,the more earnings manipulation,the more obvious the negative relationship between financial asset allocation and earnings persistence;non-linear effect analysis shows that when the financial asset allocation is less or more,the negative relationship between financial asset allocation and earnings persistence is more significant.The above research conclusions indicate that: a reasonable asset structure is more likely to consolidate the development foundation of the main business,improve the quality of operation and enhance cash flow stability.However,the financial asset allocation driven by profit financialization can easily weaken the industrial foundation,thereby damaging the sustainable profitability of enterprises and reducing earnings persistence.Secondly,in terms of financial asset allocation and corporate fraud,the results show that financial assets allocation can increase corporate fraud,while reducing the fraud detection and increasing the fraud propensity.Further,after the exploration of the transmission path,it finds that information asymmetry and agency costs are the pathways for the positive relationship;after distinguishing the types of corporate fraud,the investigation reveals that the positive relationship is mainly manifested in false disclosure;after analyzing the corporate fraud motives,it finds that financial asset allocation will enhance arbitrage,earnings management,and benefits expropriation motivation;non-linear effect analysis shows that when the financial asset allocation is less or more,the positive relationship between financial asset allocation and corporate fraud is more significant;the peer effect analysis finds that financial assets allocation has obvious peer effect,which can increase corporate fraud.In terms of financial asset allocation and value relevance of earnings,we find that financial asset allocation negatively affects the value relevance of earnings,supporting the efficient market hypothesis rather than the function fixation hypothesis,and it mainly manifests as a reduction in value relevance of sustainable earnings.Further,after the exploration of the transmission path,the investigation reveals that squeezing out industrial investment,increasing operating risks,and reducing the quality of earnings are the pathways for the loss of capital market information efficiency caused by the financialization of real business entities;after distinguishing the types of financial asset allocation,it finds that standardized trading financial asset allocation is more likely to reduce the value relevance of earnings;after examining the adjustment factors,we find that when the financial marketization is high,the negative relationship between financial asset allocation and the value relevance of earnings is more significant;non-linear effect analysis shows that when the financial asset allocation is less or more,the negative relationship between financial asset allocation and value relevance of earnings is more significant.The above research conclusions indicate that: financial asset allocation can deteriorate the information environment of the capital market by increasing the "noise" in the process of information generation,interpretation and dissemination,thereby reducing the efficiency of resource allocation,which is manifested by a lower value relevance of earnings.Thirdly,in terms of financial asset allocation governance,the study finds that strategic governance,mixed shareholders governance,directors’ and senior manager’insurance,and non-penalty market regulations can deter financial asset allocation.Further,after distinguishing the types of financial asset allocation,the study finds that strategic governance mainly deters non-operating financial asset allocation,mixed shareholders governance and non-penalty market regulations can increase operating financial asset allocation and deter the allocation of non-operating financial asset allocation,and directors’ and senior manager’ insurance reduces operating financial asset allocation but promotes real capital investment;after distinguishing the types of non-penalty market regulations,it finds that inquiry and attention letters can negatively affect financial asset allocation,and the deterrent effect of inquiry letters is more obvious;after considering the impact of nature of property right,enterprise size or marketization,we find that the deterrent effect of strategic governance on financial asset allocation is stronger for non-state-owned enterprises,large-scale enterprises or high marketization group,the deterrent effect of mixed shareholders governance is stronger for non-state-owned enterprises,the negative relationship between directors’ and senior manager’ insurance and financial asset allocation is more significant in non-state-owned enterprises,small-scale enterprises or low marketization group,and the negative impact of non-penalty market regulations on financial asset allocation is more significant in non-state-owned enterprises or high marketization group;after examining the economic consequences,the empirical results show that the reduction of financial asset allocation brought about by strategic governance can further improve investment efficiency,the deterrent effect of mixed shareholders governance and non-penalty market regulations increases operating performance,and the negative impact of directors’ and senior manager’ insurance on financial asset allocation further reduces operating risks.The above research conclusions indicate that: strategic governance,shareholder governance,stakeholder governance and government governance can enable managers to make strategic investments,which are related to the overall layout,long-term development and future planning of enterprises,and to maintain vigilant against financialization.However,the internal logic and dependence conditions of different governance mechanisms are different.Based on the above research conclusions,it has important theoretical significance and practical guidance value to study the economic consequences of financial asset allocation from the perspective of product market and capital market.In theory,the study helps to enrich the theoretical analysis framework of the economic consequences of financial asset allocation,dialectically look at the market performance of financial asset allocation,and understand the internal logic of economy’s "from-real-to-virtual" shift disturbing the product market and capital market,thereby revealing the importance and necessity of returning and focusing on the main business to continuously create value,and enrich the "investment-centric theory".In practice,the thesis provides a reference for regulatory authorities to accelerate financial market reforms,guide financial development to serve the real economy,weaken market arbitrage motive,and prevent real economic risk.At the same time,it is helpful for enterprises to focus on the development of main business,improve corporate governance mechanism,promote long-term growth,and form a virtuous circle between enterprises and the markets.