The Impact of Financialization on Innovation in Enterprises--An Empirical Study Based on Chinese A-share Listed Companies

Liushuo He

doi:10.18535/ijsrm/v12i10.em11

Abstract

This paper examines the impact of corporate financialization on the innovation activities of Chinese A-share listed companies. The study finds that a higher degree of corporate financialization is associated with lower levels of innovation, indicating that financialization suppresses corporate innovation. This phenomenon primarily arises because the objective of allocating financial assets is to substitute financial asset income for main business income, leading firms to focus excessively on short-term financial returns rather than long-term physical investments. The study recommends that policymakers focus on the coordinated development of finance and the real economy, while being vigilant against the negative impacts of excessive financialization on high-quality economic growth. Additionally, corporate managers should devise prudent asset allocation strategies to ensure that financial investments support innovative development in the real sector.

Keywords

Corporate financializationCorporate innovationCrowding-out effectShifting from real to financial sectors. 1. Introduction [1]

References

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[refR-1] Zhang Chengsi & Zhang Butan. (2016). The Mystery of the Decline in China's Industrial Investment Rate: A Perspective on Economic Financialization. Economic Research (12), 32-46.Google Scholar ↗

[refR-2] Krippner, G. R. (2005). The financialization of the American economy. Socio-Economic Review, 3(2), 173-208.Google Scholar ↗

[refR-3] Orhangazi, O. (2006). Financialization of the United States Economy and its Effects on Capital Accumulation: A Theoretical and Empirical Investigation (Doctoral dissertation, University of Massachusetts Amherst).Google Scholar ↗

[refR-4] Stockhammer, E. (2010). Financialization and the Global Economy. Political Economy Research Institute Working Paper, 242(40), 1-17.Google Scholar ↗

[refR-5] Bodnar, G. M., Hayt, G. S., Marston, R. C., & Smithson, C. W. (1995). Wharton Survey of Derivatives Usage by US Non-Financial Firms. Financial Management, 24(2), 104-114.Google Scholar ↗

[refR-6] Yin Xianan & Zhan Ximing. (2023). The Impact and Mechanism of Financialization on Digital Transformation in Real Enterprises. China Circulation Economy (10), 26-38. doi:10.14089/j.cnki.cn11-3664/f.2023.10.003.DOI ↗Google Scholar ↗

[refR-7] Stockhammer, E. (2004). Financialisation and the Slowdown of Accumulation. Cambridge Journal of Economics, 28(5), 719-741.Google Scholar ↗

[refR-8] Du Yong, Zhang Huan & Chen Jianying. (2017). The Influence of Financialization on the Future Main Business Development of Real Enterprises: Promotion or Suppression. China Industrial Economics (12), 113-131. doi:10.19581/j.cnki.ciejournal.20171214.007.DOI ↗Google Scholar ↗

[refR-9] Liu Shuwen, Liu Jianqiu & Yang Yang. (2023). Corporate Financialization and Production Efficiency: "Catalyst" or "Stumbling Block". Nankai Business Review (01), 55-68.Google Scholar ↗

[refR-10] Yin Meiqun, Sheng Lei & Li Wenbo. (2018). Executive Incentives, Innovation Investment and Company Performance—An Empirical Study Based on Endogenous Perspective by Industry. Nankai Business Review (01), 109-117.Google Scholar ↗

[refR-11] Sunder, J., Sunder, S. V., & Zhang, J. (2017). Pilot CEOs and Corporate Innovation. Journal of Financial Economics, 123(1), 209-224.Google Scholar ↗

[refR-12] Wei Hao, Lian Huijun & Wu Jun. (2019). Sino-US Trade Friction, US Import Shock and Chinese Enterprise Innovation. Statistical Research (08), 46-59. doi:10.19343/j.cnki.11-1302/c.2019.08.004.DOI ↗Google Scholar ↗

[refR-13] Zhang Xiaodi & Zhu Qin. (2007). On the Benign Interaction between Innovation and Market Power Construction of Chinese Enterprises in the Global Value Chain. China Industrial Economics (05), 30-38. doi:10.19581/j.cnki.ciejournal.2007.05.004.DOI ↗Google Scholar ↗

[refR-14] Rehman, S. U., Kraus, S., Shah, S. A., Khanin, D., & Mahto, R. V. (2021). Analyzing the Relationship Between Green Innovation and Environmental Performance in Large Manufacturing Firms. Technological Forecasting and Social Change, 163, 120481.Google Scholar ↗

[refR-15] Demir, F. (2009). Financial liberalization, private investment and portfolio choice: financialization of real sectors in emerging markets. Journal of Development Economics, 88(2), 314-324.Google Scholar ↗

[refR-16] Xie Jiazhe, Wang Wentao & Jiang Yuan. (2014). Manufacturing Financialization, Government Control and Technological Innovation. Economic Trends (11), 78-88.Google Scholar ↗