Does Smart City Construction Inhibit Corporate Financialization? Evidence from China

Hao Hu and Zi Ye ()
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Hao Hu: School of Economics, Shanghai University, Shanghai 200444, China
Zi Ye: School of Economics, Shanghai University, Shanghai 200444, China

Sustainability, 2025, vol. 17, issue 3, 1-22

Abstract: Against the backdrop of funds flowing from the real economy to the virtual economy, the trend of corporate financialization is becoming more and more obvious. Establishing how to guide enterprises to return to their main business is the key to guaranteeing the sustainable development of the economy. Considering the promulgation of new accounting standards in 2007 and the availability and completeness of listed company data, this paper takes A-share listed companies from Shanghai and Shenzhen stock markets in China from 2008 to 2022 as research samples. This paper takes China’s smart-city pilot policy as a quasi-natural experiment and constructs a time-varying difference-in-differences (DID) model to empirically analyze the impact of smart city construction on corporate financialization. According to the study, smart city construction can significantly inhibit corporate financialization. Specifically, this paper measures corporate financialization by the proportion of financial assets to total assets, and empirical results show that when the city where the enterprise is located is selected as a smart city pilot, the degree of corporate financialization decreases by 0.7%. After a series of robustness tests, this conclusion still holds. Mechanism analysis indicates that smart city construction can inhibit corporate financialization by alleviating financing constraints and improving profitability. Heterogeneity analysis shows that smart city construction has a stronger inhibitory effect on corporate financialization in the central and western regions, state-owned enterprises, management shareholdings, industries with a high degree of competition, and enterprises in the growth and maturity stages. On the one hand, the research results of this paper can help us to understand the influencing factors of corporate financialization, avoid the excessive financialization of enterprises, and promote the sustainable development of enterprises. On the other hand, it also tests the policy effect of smart cities and provides help for the subsequent policy formulation of smart city construction.

Keywords: smart city construction; corporate financialization; time-varying difference-in-differences (DID); quasi-natural experiment (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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