ABSTRACT
Nowadays, academics and governments are increasingly concerned about the growing size of non-financial enterprises’ ownership of financial products. Taking corporations listed in the Chinese stock market as the research sample, this study investigates the impact of Economic Policy Uncertainty on corporate financialization. We find that EPU will exacerbate corporate financialization, which is robust after conducting a series of estimation tests. Further investigation reveals that financing constraints may be the primary channel by which EPU motivates corporate booming financial product holdings. The exacerbation effects are particularly prominent in firms with small size, non-SOEs, weak corporate governance, and firms at a low growth stage. Overall, our results provide a novel explanation for the behaviour of corporate financialization in emerging capital markets.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 Please refer to Online Appendix OA1.4 for description of choosing fixed effect model.
2 Please refer to Online Appendix OA1.1 for detailed measurement of EPU_China.
3 Please refer to Online Appendix OA1.2 for detailed measurement of Fin.
4 Please refer to Online Appendix OA1.3 for detailed description of control variables.
5 Detailed described in Online Appendix OA2.
6 Please refer to Online Appendix OA3.1 for robustness check of detailed measurement of Fint +1, Fin1, Fin2, Fin3, EPU_HKpaper and lnEPU.
7 Please refer to Online Appendix OA3.2 for robustness check of detailed description of adding more variables.
8 Please refer to Online Appendix OA3.3 for robustness check of detailed description of IV approach.
9 Please refer to Online Appendix OA3.4 for robustness check of winsorizing sensitivity test.
10 Please refer to Online Appendix OA3.5 for detailed description of channel analysis.
11 Please refer to Online Appendix OA4.1 for detailed description of further analysis of firm characteristics.
12 Please refer to Online Appendix OA4.2 for detailed description of further analysis of monitoring mechanisms.
13 Please refer to Online Appendix OA4.3 for detailed description of further analysis of growth mechanisms.