The Impact of Corporate Financialization on Real Operating Performance

Abstract

Serving the real economy is an important route by which the financial system improves the efficiency of resource allocation and supports high-quality development. This paper examines how corporate financialization affects real operating performance. The sample consists of Chinese A-share non-financial listed companies over the period 2015–2024, with financial firms and firms under special treatment (ST and *ST) removed. The degree of financialization is measured by the share of financial assets in total assets, and real operating performance reflects the profitability of a company’s core business. Data processing and panel regressions were carried out in Python. After firm characteristics, industry fixed effects and year fixed effects are controlled for, the coefficient on corporate financialization is 0.2073 and is significantly positive at the 1% level. Winsorizing continuous variables, replacing the dependent variable and using a one-period lag of the key explanatory variable leave both the sign and the significance of the coefficient unchanged. When the sample is split by ownership, the positive relationship holds for state-owned and non-state-owned companies alike, with a slightly larger coefficient among the latter. The overall degree of financialization in the sample is low, and under such conditions a moderate allocation to financial assets may serve as a liquidity reserve, a channel for reallocating funds and a buffer against risk. This does not mean that a higher degree of financialization is always better: the risk that funds drift away from the core business and chase financial returns still has to be guarded against. These results provide up-to-date listed-company evidence on the relationship between corporate financialization and real operating performance, and they offer reference points both for policies that guide the allocation of financial assets and for corporate treasury management.