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Financialization and Risk Taking of Non-Financial Corporations Empirical Evidence from Chinese Listed Companies

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Listed:
  • Chong Li
  • Qiuge Yao
  • Jing Wu
  • Daoyuan Wang

Abstract

Using China's A-share listed companies as a sample, this paper provides empirical evidence that with the deepening of financialisation in non-financial corporate sector, the level of corporate risk-taking is significantly reduced, and the complete mediating effect is R&D innovation. The results are still robust when we use instrumental variable method, and the negative impact of financialisation on corporate risk taking is significantly reduced under the constraints of a good governance mechanism. It is further found that as the degree of financialization in non-financial corporate sector deepens, even if enterprises have the ability to take risks, they have no willingness to take risks. This paper theoretically demonstrates the micro-inducement of the insufficient motivation for enterprise development, under the “siphon effect†of financialization. JEL classification numbers: G32, G38Keywords: Financialization; Risk taking; Entrepreneurial spirit; Corporate governance.

Suggested Citation

  • Chong Li & Qiuge Yao & Jing Wu & Daoyuan Wang, 2019. "Financialization and Risk Taking of Non-Financial Corporations Empirical Evidence from Chinese Listed Companies," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(3), pages 1-5.
    • Handle: RePEc:spt:apfiba:v:9:y:2019:i:3:f:9_3_5
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    Cited by:

    1. Xiang Cai & Jing Li & Jun Wu & Haijing Zhang & Ping Chen & Xin Huang, 2022. "The Impact of Enterprise R&D Investment and Government Subsidies on Technological Progress: Evidence from China’s PV Industry," Energies, MDPI, vol. 15(12), pages 1-26, June.
    2. Wang, Hanying & Qi, Ju & Li, Zhuohua & Sensoy, Ahmet & Xing, Hongwei, 2024. "Excessive financialization and “Original Sin Theory”: Redemption from corporate reputation," Research in International Business and Finance, Elsevier, vol. 70(PA).
    3. Chong-Chuo Chang & Oshamah Lin Lin & Oshamah Yu-Cheng Chang & Oshamah Kun-Zhan Hsu, 2023. "Impact of Financial Liberalization on Firm Risk," Advances in Decision Sciences, Asia University, Taiwan, vol. 27(3), pages 14-45, September.

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    More about this item

    Keywords

    financialization; risk taking; entrepreneurial spirit; corporate governance.;
    All these keywords.

    JEL classification:

    • 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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