Nonlinear Impact of Corporate Financialization on Sustainable Development Ability: Evidence from Listed Companies in China

Shuanglian Chen, Benhuan Nie and Xiaohua Huang ()
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Shuanglian Chen: Guangzhou Institute of International Finance, Guangzhou University, Guangzhou 510405, China
Benhuan Nie: School of Economics and Statistics, Guangzhou University, Guangzhou 510006, China
Xiaohua Huang: School of Economics and Statistics, Guangzhou University, Guangzhou 510006, China

Sustainability, 2024, vol. 16, issue 8, 1-23

Abstract: This paper takes 1179 non-financial listed companies in China from 2010 to 2021 as samples and constructs a panel fixed-effect model to examine the effect of corporate financialization on sustainable development ability. Also, we further use the moderating effect model and the mediating effect model to explore the moderating roles played by financing constraints and environmental uncertainty, as well as the influencing mechanisms transmitted by financialization motives. The results are as follows: (1) There is a significant and robust inverted U-shaped relationship between corporate financialization and sustainable development ability, which indicates the existence of a moderate range of corporate financialization in regard to the sustainable development ability of companies. (2) Financing constraints and environmental uncertainty have moderating effects on the inverted U-shaped relationship between corporate financialization and sustainable development ability. With high financing constraints (environmental uncertainty), the sustainable development ability of companies reacts more sensitively to thep change in corporate financialization level. (3) Companies hold financial assets with precautionary saving motive in the low financialization level, and the reservoir effect plays a dominant role. The sustainable development ability of companies is enhanced. However, companies increase their holdings of financial assets for speculative arbitrage motive in the high financialization level, where the short-term wealth effect becomes dominant. The results of this paper are helpful for companies’ decision-making in sustainable development and for government policy formulation in economic development.

Keywords: corporate financialization; sustainable development ability; financing constraint; environmental uncertainty; financialization motive (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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