A Study Of The Dynamics Of Corporate Financial Asset Allocation And The Impact On Equity Liquidity

In recent years,as the trend of "de-realisation" in the real economy has become more and more obvious,many non-financial enterprises,faced with the double pressure of declining benefits from real investments and high returns from the financial sector,have started to turn their attention to investments in the financial and real estate industries,sometimes even reducing the proportion of funds invested in real investments,hoping to taking advantage of the huge benefits that financial investments bring to enterprises in order to increase the level of their company’s profits.So,does the allocation behaviour of these financial assets of companies in China at this stage affect the liquidity of the company’s stock trading?So,does the allocation behaviour of these financial assets of listed companies in China at this stage affect the liquidity of the company’s stock trading?Using sample data of non-financial companies in Shanghai and Shenzhen from 2010 to 2020,this paper explores the role of companies’ allocation of financial assets on stock liquidity in a more systematic manner with the idea of "motivation exploration-liquidity impact",and concludes that stock liquidity decreases significantly after companies allocate financial assets.This thesis first systematically analyses the current situation of financial asset allocation of enterprises of non-financial entities in China,then selects data of listed companies in Shanghai and Shenzhen from 2010 to 2020 in China,explores through empirical analysis whether the behaviour of financial asset allocation is motivated by speculative arbitrage or surplus management,studies the impact of enterprises’ financial asset allocation on stock liquidity on the basis of determining the motivation,and in the previous paper motivations explored are added as moderating variables to the effect of financial asset allocation on equity liquidity to examine whether they have a moderating effect on the relationship between the two.Finally,the differences in this effect across ownership and across ownership concentrations are examined.The findings of this paper are as follows:(1)by introducing the two variables of net cash inflows and financial investment returns,it is concluded that the financial investments made by non-financial entities in China are profit-seeking,i.e.the financial investments are made by enterprises to divide the excess profits in the financial sector rather than to manage the surplus cash flows;(2)the proportion of financial assets allocated by non-financial entities at this stage in China has a significant "crowding out" effect on the liquidity of stock trading,and the speculative-motivated allocation of financial assets will strengthen the negative relationship between the two,i.e.the inhibitory effect on stock liquidity is strengthened.This thesis argues that at this stage,the level of financial asset allocation of China’s real enterprises is too high,which will have a significant negative impact on the liquidity and longterm development of the enterprises’ stocks.In order to improve the liquidity of corporate stock trading,then,on the one hand,enterprises should realize the importance of allocating a reasonable ratio of financial assets to operating assets,and improve their main business operations by strengthening their own innovation rather than relying solely on high-risk and high-return financial investments to improve their plight of insufficient cash flow.On the other hand,the government and the relevant regulatory authorities must adopt appropriate economic policies to reverse the current situation where the difference in profits between the real economy and the financial sector is too large,so as to drive enterprises to focus on production and operation rather than on financial speculation and arbitrage.