Financialization of the firms and between-firm inequality: evidence from China

ABSTRACT

In this paper, we investigate the distributional effects of the financialization of firms from the perspective of between-firm inequality. Using financial statement data of nonfinancial firms listed on China’s A-share stock market, we find that the financialization of firms significantly increases the dispersion of employee wage between firms. Mechanism analysis shows the financialization of firms increases between-firm inequality through the larger increasing effect on employee wages for high-wage firms through the rent sharing effect. The findings suggest that an increase in wage rent in low-wage firms could be encouraged to relieve the negative effects of financialization on inequality.

KEYWORDS:

• Financialization
• inequality
• between-firm inequality
• China

JEL CLASSIFICATION:

• O16
• O15

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The new set of Accounting Standards for Business Enterprises, which came into effect on January 1, 2007, gives a more detailed measurement and disclosure of financial statements.

Additional information

Funding

This paper was funded by National Natural Science Foundation of China [grant number: 72173012], Major Program of National Fund of Philosophy and Social Science of China [grant number: 23&ZD174], Fundamental Research Funds for the Central Universities of China [grant number: 2022CDJSKPT24].