Industry Profit Margins And Corporate Financialization

In recent years,a large number of listed companies in our country have invested in financial assets and seized financial profits in the face of the downturn in their main business.Therefore,the phenomenon of economic and financialization of the physical industry has attracted the attention of scholars at home and abroad.In this context,based on the theory of company diversification and free cash flow,this paper selects listed companies in the non-financial industry of China and Shanghai A shares from2014 to 2018 as the research sample,and establishes a multiple regression model under the condition of eliminating endogenousness.The relationship and mechanism between the annual average profit margin of the A-share listed company and the financial industry and the company's financial level.The empirical study found that:(1)The gap between the annual profit rate of the industry of the listed company and the financial industry is significantly positively related to the level of financialization of the listed company,that is,the gap between the annual profit rate of the industry of the listed company and the financial industry will increase The level of financialization of listed companies,after considering the endogenous nature of the regression model,the results are still significant.(2)In the study of the mechanism of action,it was found that there are two paths of influence.One way is for listed companies to improve the company's return on assets as an intermediary to achieve the impact of the profit margin of the listed company's industry and the financial industry on the level of financialization,that is,the shareholders and managers of the listed company face the development of the industry they operate in.In the case of not optimism,through continuous purchase of financial assets,improve the company's asset return rate,thereby improving the company's financial level;another way of influence is the annual average profit rate of thelisted company's industry and the financial industry's annual average profit rate.The gap led to a reduction in the company's productive expenditures and an increase in the purchase of financial assets,resulting in a crowding-out effect,which further improved the company's financial level.(3)Further expansive research found that if the domestic macroeconomic operation is stable and the GDP grows steadily,it can significantly increase the confidence of domestic investors and business managers and the confidence of the real economy.Under the better macroeconomic development environment,even when a listed company faces a profit gap between the industry where the business belongs and the financial industry,it can inhibit the company's financial level;When there are gaps in the industry,they are more inclined to ignore financial risks,invest in financial assets,grab financial industry profits,and improve the company's level of financialization;companies with a higher concentration of equity are more likely to be affected by shareholders' pursuit of maximum profits by purchasing financial assets Obtain financial profits,and the level of financialization of the company will also increase;the more the issuing company is in financial difficulties,the more it will borrow(increasing the company's financial leverage),hoping to increase its ability to repay debts by buying financial assets and get rid of Financial distress.This article combines the behavior of shareholders and corporate management from the perspective of the profit gap between the physical industry and the financial industry to enrich the research on the motive factors for financialization of listed companies.It also prevents the government and corporate regulatory departments from preventing excessive financialization of listed companies and resolving the hollowing out of business operations.The crisis provides a basis for preventing systemic financial risks.