Study On The Relationship Between The Level Of Corporate Financialization And Deleveraging

Since the financial crisis in 2008,there has been a trend of financialization in China,which is manifested at the micro level by the gradual increase in the proportion of financial assets and financial income of enterprises,which has a certain crowding out effect on real investment.2015 Central Economic Work Conference formally laid out the important task of "three to go,one to drop,one to make up".It is clear that deleveraging is a major task to lead the new normal of China’s economy.On the one hand,financial assets can be used as a reservoir of liquidity to replace corporate debts,and on the other hand,enterprises may increase their external debts to invest in financial assets in order to earn high financial returns.It is necessary to study the relationship between corporate financial asset allocation and corporate deleveraging so as to provide some empirical evidence for corporate deleveraging.This paper analyzes the relationship between financialization and deleveraging with the help of capital structure theory,precautionary savings theory,and principal-agent theory,on the basis of which four main hypotheses are proposed:(1)financial asset holdings can promote deleveraging;(2)financial asset profits can inhibit deleveraging;(3)the promotion effect of financial asset holdings on deleveraging is greater than the inhibiting effect of financial asset holdings on deleveraging.(4)internal control plays a moderating role between financialization and deleveraging,as internal control can positively moderate the deleveraging effect of financial asset holding on the one hand,and negatively moderate the deleveraging effect of financial asset profitability on the other.This paper conducts regression analysis with the data of China’s A-share listed companies from 2007 to 2021,and draws the following conclusions:(1)financial asset holding and deleveraging show a positive correlation,which verifies hypothesis 1;(2)financial asset profitability and deleveraging show a negative correlation,which verifies hypothesis 2;(3)after testing in various ways,we find that the positive correlation between financial asset holding and deleveraging(3)The positive correlation between financial asset holding and deleveraging is stronger than the negative correlation between financial asset profitability and deleveraging,and finally shows a positive correlation between financialization and deleveraging,which verifies hypothesis 3;(4)Internal control plays a moderating role between financialization and deleveraging,and internal control can not only play a positive moderating role on the positive correlation between financial asset holding and deleveraging,but also play a negative role on the negative correlation between financial asset profitability and deleveraging.(4)Internal control not only moderates the negative relationship between financial asset holding and deleveraging,but also moderates the negative relationship between financial asset profitability and deleveraging,which verifies hypothesis 4.In the further analysis section,this paper performs regression tests on firms according to four aspects: whether they are excessively financialized,whether they are excessively indebted,whether the CEO has a financial background,and the nature of the firm.(1)Regressions are grouped according to whether they are excessively financialized or not.Since this paper argues that financial asset holdings can contribute to corporate deleveraging,which is different from the findings of some existing studies,this paper establishes a model to identify whether a firm is overly financialized from the perspective of financial asset holdings as an indicator,classifies all firms into overly financialized firms and non-overly financialized firms,and then conducts a positive correlation between financial asset holdings and deleveraging A detailed analysis of the positive relationship between financial asset holdings and deleveraging is conducted.The regression results show that the financial asset holdings of the over-financialized firms inhibit deleveraging,while the financial asset holdings of the under-financialized firms promote deleveraging.Since the number of firms in the non-overfinancialized group is much larger than that in the overfinancialized group,the overall effect of the sample is facilitative.(2)The regressions are grouped according to whether they are over-indebted or not.The regression results show that both financial asset holdings and financial asset profits of over-indebted firms inhibit deleveraging,while financial asset holdings of non-over-indebted firms promote deleveraging and financial asset profits inhibit deleveraging.(3)Regressions are grouped by CEO financial background.The regression results show that the facilitative effect of financial asset holdings on deleveraging is more significant among firms with CEOs who do not have a financial background,while the inhibitory effect of financial asset profits on deleveraging is more significant among firms with CEOs who have a financial background.(4)Grouping by firm nature.The regression results show that the facilitating effect of financial asset holdings on deleveraging is more pronounced among state-owned enterprises,while the inhibiting effect of financial asset profitability on deleveraging is more pronounced among non-state-owned enterprises.Finally,the recommendations of this paper are:(1)enterprises should allocate resources appropriately,grasp the proportion of financial assets allocation,and strengthen the risk control of the company;(2)enterprises should improve internal control and effectively strengthen the role of internal control in regulating the financing and investment behavior of enterprises;(3)the government should strengthen the regulation of the financial sector,implement the reform of the financial system,and strictly control the investment in the financial sector;(4)the government should implement the classification management,focus on the control of over-financialization,over-indebtedness,CEO with financial background,and non-state enterprises,and implement differentiated policies to reduce the "speculative motive" of these enterprises in allocating financial assets.(4)The government should implement categorized management,focusing on control of over-financialization,overindebtedness,CEO with financial background and non-state enterprises,and implement differentiated policies to reduce the "speculative motive" of these enterprises in allocating financial assets.(5)The policy should address the root cause of enterprise development constrained by financing constraints,to create a favorable financing environment for enterprises.(6)Maintain policy stability and help enterprises establish reasonable expectations.The innovation of this paper is that(1)this paper divides the financialization of enterprises into two indicators,namely,financial asset holding,which represents the "pooling motive" of enterprises,and financial asset profitability,which represents the "speculative motive" of enterprises,according to their different motives for allocating financial assets.On the one hand,we explore the relationship between the two indicators and deleveraging,and on the other hand,we further explore the combined effect of the two indicators and deleveraging.(2)Most of the existing studies focus on the relationship between financialization and corporate leverage,financialization and dynamic adjustment of corporate capital structure,while leverage and dynamic adjustment of capital structure fail to clarify the direction of capital structure adjustment,this paper sets the dependent variable as deleveraging,which clarifies the direction of corporate capital structure adjustment and makes the research results clearer and more targeted.(3)In the further analysis section of this paper,group regressions are conducted according to the dimensions of whether the financialization is excessive,whether the debt is excessive,and whether the CEO has a financial background to further quantify the optimal state of financialization and deleveraging,to explore the impact of the CEO’s financial background,and to deepen the relevance of this paper.