Excessive Financialization Of Entity Enterprises And Enterprise Value

Under the current macroeconomic background,the operating profitability of real industry is facing a general decline.The financial industry,with its lucrative return on investment,is attracting more and more enterprises to get involved in the financial investment field,showing a trend of increasing the degree of enterprise financialization.The academic research finds that the influence of enterprise financialization on enterprise development cannot be generalized,moderate financialization will produce positive economic impact,while excessive dependence on the path of financialization will intensify the "idle arbitrage" of funds in the virtual economy system(Xiao Zhongyi et al.,2022).The root cause of the economy being distracted from their intended purpose lies in the excessive financialization of real enterprises(Xu Zhaohui et al.,2022).Therefore,in order to prevent this phenomenon and improve the quality of economic development,we should scientifically evaluate the effect of excessive financialization of real enterprises on its development.Then,how to judge and screen the excessive financialization of enterprises? What will be the relationship between excessive financialization and enterprise value of entity enterprises after distinguishing the excessive financialization samples? Combined with corporate governance,can executive incentives play a moderating role in the relationship between them? Will the relationship be changed by the internal and external heterogeneity of firms?This paper examines the relationship between excessive financialization and enterprise value of A-share non-financial listed enterprises from 2011 to 2021,including the following aspects: firstly,it constructs a financial adequacy screening model to identify whether an entity is over-financialized and explores its different effects on enterprise value.Secondly,combined with the realistic background of "economy being distracted from their intended purpose ",this paper conducts further analysis based on excessive financialization: explores the regulating effect of executive incentives between excessive financialization and enterprise value,and analyzes the heterogeneity of economic consequences of excessive financialization from the internal and external perspectives of enterprises.The study finds that:(1)The phenomenon of excessive dependence on financial path of Chinese entity enterprises is universal.(2)There is an inverted U-shaped relationship between corporate financialization and corporate value.After distinguishing the appropriateness of financialization,it is found that moderate financialization will not have a negative impact on corporate value,but excessive financialization will significantly inhibit the improvement of corporate value.(3)In terms of moderating effect,executive equity incentive weakens the inhibition effect of excessive financialization on enterprise value,while executive monetary compensation incentive enhances the inhibition effect of them.(4)In the heterogeneity analysis,the negative effect of over-allocation of financial assets on enterprise value is more pronounced for firms that are state-owned,in a mature stage,in a highly uncertain economic policy environment,or located in the eastern region.Finally,relevant suggestions are put forward: at the micro level,(1)companies should always focus on their main business and dynamically adjust the allocation of financial assets to maintain a moderate level,basing on the internal and external heterogeneity of the company.(2)Companies should further improve the design of executive equity incentive mechanism,while ensuring the effectiveness of executive compensation incentive.(3)Investors should analyze the information contained in the financialization appropriateness index,rationally anticipate the development prospects of enterprises and make scientific decisions.At the macro level,(1)the government should create a favorable financial market environment,and compress the space for arbitrage of financial products.(2)Further enhance the attractiveness and profit margin of the real economy.(3)Use the new-generation information technology to screen out indiscriminate leverage and excessive allocation of financial assets by real enterprises,carry out classified supervision,and guide enterprises to maintain reasonable financial asset allocation.