Performance shortfalls and financialization of non-financial enterprises in China
ISSN: 1750-614X
Article publication date: 28 November 2022
Issue publication date: 24 November 2023
Abstract
Purpose
Based on the theory of performance feedback, this study aims to explore the theoretical relationship between performance shortfalls and the financialization of non-financial enterprises. It further analyzes the moderating effect of economic policy uncertainty (EPU) and organizational redundant resources.
Design/methodology/approach
Multiple regression analysis is used on 16,555 initial samples of 2,658 Chinese A-share issuing enterprises from 2007 to 2019 to empirically test the relationship between performance shortfalls and the financialization of non-financial enterprises, and an instrumental variables-generalized moments estimation model is also used to verify the robustness of the results.
Findings
The results reveal that the greater the performance gap below the aspiration level, the higher the degree of enterprise financialization. Moreover, EPU strengthens the relationship between performance shortfalls and financialization, whereas organizational redundant resources weaken the relationship between performance shortfalls and financialization.
Practical implications
Decision-makers should determine the aspirated performance level of enterprises to make investment decisions that are most conducive to the long-term development of enterprises. Each enterprise should establish scientific management evaluation and supervision systems to avoid financial investment behaviors that place too much emphasis on short-term performance.
Originality/value
This study finds that financialization is one of the reactions when performance of enterprises is lower than the aspiration level, thus expanding the functional dimensions of performance feedback and supplementing the research on the influencing factors of enterprise financialization. The results also reveal information about situational factors, helping identify the boundary conditions through which performance below aspirations affects enterprise financialization.
Keywords
Acknowledgements
This work was supported by the special fund projects of the central government to support the reform and development of local universities (2022): construction of superior disciplines of applied economics; and the special fund projects of the central government to support the reform and development of local universities (2022): new liberal arts laboratory construction and the Innovative team project of Economics and Management.
The author would like to thank Professor Cherrie Jiuhua Zhu (Editor-in-Chief), Professor Fan Di (Deputy Editor-in-Chief), Dr Yiyi Su (Associate Editor) and anonymous reviewers for their excellent guidance and constructive comments during the review process.
Conflicts of interest: The author declares no known conflicts of financial interests or personal relationships that could have appeared to influence the work reported in this study.
Data availability: The data used to support the findings of this study are available from the corresponding author upon request.
Citation
Wang, S. (2023), "Performance shortfalls and financialization of non-financial enterprises in China", Chinese Management Studies, Vol. 17 No. 6, pp. 1318-1345. https://doi.org/10.1108/CMS-11-2021-0472
Publisher
:Emerald Publishing Limited
Copyright © 2022, Emerald Publishing Limited