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The Empirical Research on the Impact of the Financial Asset Allocation on Firm Value

【Authors】
QI Yudong, ZHANG Renzhi
【WorkUnit】
QI Yudong (Beijing Normal University, 100875)
ZHANG Renzhi (Capital University of Economics and Business, 100070)
【Abstract】

With the deepening of financialization, financial assets have become an important part of firms' assets, and have an important influence on firm value creation. This paper takes the non-financial listed companies of A shares in China from 2007 to 2016 as the study subject, by constructing the model under different holding motives, and empirically analyzes the relationship between the financial asset allocation and firm value. The results show that the firm financial asset allocation as a whole can significantly reduce the firm value of the enterprise. For companies with different levels of financing constraints, there is no significant correlation between financial assets allocation and firm value; and for the firms with stronger arbitrage motive, there is a significant negative correlation between the financial asset allocation and firm value. Further studies have found that the allocation of financial assets has a crowding out effect on R&D investment and capital investment, and significantly inhibits the promotion of TFP. Finally, this paper puts forward relevant policy recommendations from two aspects of government and enterprise and in view of the phenomenon of “off real but into fictitious economy” and “the real sector being financial”.

JEL:G31,G33

【KeyWords】
Financial Asset Allocation, Firm Value, Transmission Mechanism, Arbitrage Motive