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Does cross-border capital flow promote corporate financialization? From the corporate risk-taking perspective

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  • Xu, Bowen
  • Chen, Min

Abstract

This study employs a two-way fixed effects model to examine the relationship between cross-border capital flows and corporate financialization. The empirical results show that cross-border capital flows can significantly promote corporate financialization. The significance persists after robust tests. Mechanism tests indicate that cross-border capital flows can significantly affect corporate financialization through the risk-taking channel and the financing constraints channel, with both exhibiting partial mediating effects. Furthermore, it is found that inclusive finance plays a negative moderating role, i.e., it weakens the promoting effect of cross-border capital flows on corporate financialization. In heterogeneity tests, tightening of macroprudential policies and the category of corporate equity ownership both yield heterogeneous results. This study reveals the micro-level mechanism through which cross-border capital flows drive the shift of corporate resources from the real to the virtual economy, providing critical policy implications for guiding funds back to the real economy.

Suggested Citation

  • Xu, Bowen & Chen, Min, 2026. "Does cross-border capital flow promote corporate financialization? From the corporate risk-taking perspective," Finance Research Letters, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:finlet:v:89:y:2026:i:c:s1544612325025127
    DOI: 10.1016/j.frl.2025.109263
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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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