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

Chong Li, Qiuge Yao, Jing Wu and Daoyuan Wang

Journal of Applied Finance & Banking, 2019, vol. 9, issue 3, 5

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.

Date: 2019
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