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Overpriced equity and financialization

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  • Yu, Zhichao
  • Geng, Yeqiang

Abstract

This study investigates how equity mispricing drives listed enterprises’ non-traditional financial activities. We identify executive speculation and investor incentives as key catalysts, wherein overvalued stocks incentivize risk-seeking managerial practices and short-term profit alignment with shareholders. The effects are disproportionately pronounced for non-state-owned enterprises, companies grappling with fiscal resource misalignment, and firms characterized by concentrated leadership structures. The findings underscore the dual influence of market inefficiencies and governance dynamics in accelerating financialization within the real sector. The results offer critical insights for policymakers addressing systemic risks arising from speculative finance and resource allocation distortions.

Suggested Citation

  • Yu, Zhichao & Geng, Yeqiang, 2025. "Overpriced equity and financialization," Finance Research Letters, Elsevier, vol. 85(PB).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pb:s1544612325012243
    DOI: 10.1016/j.frl.2025.107966
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    References listed on IDEAS

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    Cited by:

    1. Sun, Qian & Ge, Linyun & Gao, Yitang & Zhang, Zixi, 2025. "Does common institutional ownership matter for equity mispricing," Finance Research Letters, Elsevier, vol. 86(PA).

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