Economic Policy Uncertainty,Political Affiliation And Corporate Financialization ——A Study Based On A-share Listed Companies

Since the international financial crisis in 2008,China’s economic policy uncertainty has increased,and the trend of financial detachment from the real world and corporate de-realization has intensified,affecting the healthy and balanced development of the country’s economy.A large body of literature has focused on how economic policy uncertainty affects the financialization of firms,but ignores the role played by the political connections that exist in firms,which is considered by the literature as a key factor in resolving financing constraints and lifting institutional barriers to performance growth.How do political connections,as part of the informal system,influence firms’ financialization decisions? How does it intervene in the role of economic policy uncertainty in the de-financialization of firms? Answers to the above questions not only help to grasp the motives behind firms’ financialization decisions,but also provide policy insights to control the trend of financialization of real firms and promote healthy and orderly economic development.Based on the economic policy uncertainty index constructed by Baker et al.（2016）,this study scales the financialization trend of firms by the growth rate of the share of financial assets in the total assets of firms according to the latest corporate accounting standards and regresses it on the degree of political affiliation of corporate executives.The results of the study show that（1）rising economic policy uncertainty will dampen the trend of financialization of enterprises;（2）political affiliation can play a positive moderating role,further strengthening the inhibiting effect of economic policy uncertainty on the financialization trend of firms;and（3）mechanism analysis shows that political affiliation plays a positive moderating role by reducing the level of risk appetite of corporate executives.In addition this study reveals the heterogeneous impact of the presence of firms based on the location of listed firms,the attributes of effective controllers,and the size of corporate financing constraints.The policy implication of this paper is that appropriate political affiliation can serve the purpose of controlling the financialization of firms,thus contributing to the prevention and resolution of systemic financial risks and enhancing the ability of financial services to serve the real economy,but it should seek to ensure and maintain equity among firms in the access to financial resources.