Financial Asset Allocation And Firm Investment Fluctuation

In recent years,China’s economy has developed rapidly,the relationship between the real economy and the financial market is gradually complicated,and the dependence of enterprises on financial assets is deepening,and the problem of "being diverted out of the real economy"in economic development gradually emerges.Steady growth of the real economy is the foundation of economic prosperity,and fixed asset investment has always been one of the important pillars of the development of the real economy.However,when the degree of financialization is increased,the financial asset allocation by enterprises based on different motivations will have a differentiated impact on the fixed asset investment,thus affecting the development of the real economy.Therefore,it is of great significance to study the relationship between financial asset allocation and fixed asset investment fluctuation of enterprises for deepening financial reform and promoting high-quality development of Chinese economy.Based on the perspective of financial asset heterogeneity,this paper studies the impact of financial asset allocation on corporate investment volatility by taking the semi-annual data of China’s A-share non-financial listed companies from June 2010 to December 2021 as samples.Firstly,the paper combs the related literature of corporate financial asset allocation and fixed asset investment,and explores the financialization trend of Chinese enterprises.Secondly,based on the theory of precautionary savings and investment substitution theory,the research shows that when enterprises allocate financial assets,if they are motivated by precautionary savings,financial assets can effectively smooth the investment fluctuations.On the contrary,the allocation of financial assets has no significant impact on the investment volatility of enterprises if the motivation is to pursue short-term interests.Further,based on theoretical analysis,the fixed-effects model is used to empirically explore the relationship between financial asset allocation and investment volatility,and financial assets are divided into long-term and short-term financial assets to investigate the heterogeneous effect of financial assets.The moderating and mediating effects of agency cost and financing constraint on the relationship between financial asset allocation and investment fluctuation are analyzed.From the perspective of firm scale,firm location and investment degree,the heterogeneous effects of financial asset allocation on firm investment volatility are studied.The robustness test was conducted by dealing with endogeneity,replacing explanatory variables and deleting part of the time interval.The main conclusions of this paper are as follows.Firstly,on the whole,financial asset allocation can smooth the fluctuation of enterprise investment,so as to promote the steady development of economy.From the perspective of heterogeneity of financial assets,the allocation of short-term financial assets based on precautionary savings motivation can reduce the volatility of fixed asset investment.The allocation of long-term financial assets based on the motivation of pursuing short-term interests has no significant impact on the investment volatility of enterprises.Secondly,agency cost plays a negative moderating role in the process of financial asset allocation smoothing enterprise investment fluctuations,and financing constraints play an mediating role.Thirdly,the smoothing effect of financial asset allocation on firm investment fluctuation is characterized by heterogeneity of firm size,region and investment degree,and the robustness tests are conducted.Finally,according to the above conclusions,corresponding policy suggestions are put forward from the perspective of the government and enterprises to smooth the investment fluctuations of enterprises through reasonable allocation of financial assets.