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A model for measuring over-financialization: Evidence from Chinese companies

Author

Listed:
  • Wang, Lixia
  • Hao, Neng
  • Fang, Hui
  • Wu, Maoguo
  • Ma, Xinlei

Abstract

This study develops a model of measuring over-financialization. We use a novel approach for modeling over-financialization when the actual financialization degree is over the target level. We test this model using data from the capital market of China. The findings are: (1) theoretically, our model can accurately distinguish over-finanialization from financialization of listed companies; (2) empirically, we analyze the company characteristics that affect over-financialization. We find that (a) state-owned enterprises tend to restrain from over-financialization; (b) the size of enterprises has a significant negative correlation with over-financialization; (c) there are significant differences in corporate over-financialization across different regions.

Suggested Citation

  • Wang, Lixia & Hao, Neng & Fang, Hui & Wu, Maoguo & Ma, Xinlei, 2023. "A model for measuring over-financialization: Evidence from Chinese companies," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322006043
    DOI: 10.1016/j.frl.2022.103427
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    4. Liu, Li & He, Jun, 2023. "Does financialization affect firm’ R&D investment? Evidence from China," Finance Research Letters, Elsevier, vol. 58(PA).

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    More about this item

    Keywords

    Dual-risk factor; Financialization; Moderate financialization; Over-financialization;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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