Does economic financialization lead to the alienation of enterprise investment behavior? Evidence from China

Zhong-Liang Zheng, Xiang Gao and Xing-Liang Ruan

Physica A: Statistical Mechanics and its Applications, 2019, vol. 536, issue C

Abstract: This study investigates the squeeze effect of economic financialization on capital accumulation under the background of deepening financial trend in China. Using the dataset of listed companies in China’s manufacturing industry from 2007 to 2016, we find that economic financialization leads to the alienation of enterprises’ investment behavior. With the economic financialization deepening, companies will invest more in financial assets than in productive assets. The reason is that as expenditure in firm dividend, and profit or borrowing interests is growing, the share of their income from the financial assets is steadily increasing. We also find that the effect varies with companies size: the smaller the size of the enterprises, the stronger squeeze effect of economic financialization on capital accumulation.

Keywords: Economic financialization; Investment behavior; Squeeze effect (search for similar items in EconPapers)
JEL-codes: G11 G30 M10 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:536:y:2019:i:c:s0378437119304601

DOI: 10.1016/j.physa.2019.04.094

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