Dose Regulatory Uncertainty Affect Corporate Financialization? Based on the Perspective of the Changes of CSRC’s Chairman

ABSTRACT

Based on the perspective of the changes of CSRC’s chairman, this paper investigates the relationship between regulatory uncertainty and corporate financialization. We find that the regulatory uncertainty positively affects corporate financialization through increasing firms’ financialization motivation. Specifically, both the decline of regulatory policy continuity and regulatory intensity caused by changes of CSRC’s chairman improve corporate financialization. The positive relationship between regulatory uncertainty and corporate financialization is more pronounced in non-state-owned firms and firms in non-strategic emerging industries. These findings have implications for listed firms and policy-makers to prevent firms transforming from substantial to fictitious.

KEYWORDS:

• Changes of CSRC’s chairman
• regulatory uncertainty
• corporate financialization
• state ownership
• strategic emerging industry

Disclosure Statement

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

Notes

1. The Management System of Funds Raised by Listed Companies of Shanghai Stock Exchange, The Management Measures of Funds Raised by Listed Companies of Shenzhen Stock Exchange, and the Detailed Rules of Funds Raised by Listed Companies of Small and Medium-sized Enterprises Board all put out restrictions on the funds (including IPO funds and refinancing funds) raised by non-financial firms, requiring that the raised funds shall serve the main business, and shall not be used for financial investment such as financial assets held for trading or available-for-sale financial assets, lending to others, or investing directly or indirectly in companies whose main business is trading securities.

2. In February 2019, SHSE issued the research report Study on the Problem of Listed Firms Getting Rid of the Real to the Virtual-Based on the Empirical Evidence of Listed Firms Investment on Stocks and Real Estate, see http://www.sse.com.cn/aboutus/research/report/c/4727805.pdf.