Financialization, market structure and total factor productivity of manufacturing enterprises

With the continuous development of China's financial markets, an increasing number of manufacturing enterprises have engaged in financial activities, attracting widespread attention to their economic consequences. Using panel data from 1763 A-share listed manufacturing firms in China from 2007 to 2020, this study employs a fixed-effects regression model to analyze the relationship between corporate financialization, market structure, and total factor productivity (TFP). The results reveal a significant inverted U-shaped relationship between corporate financialization and TFP. Specifically, when the degree of financialization remains below 11.1%, a higher degree of financialization contributes positively to TFP growth; However, when corporate financialization exceeds this threshold, it impedes TFP growth. Mechanism tests suggest that financialization affects TFP through the transition of market structures from parallel to non-parallel dominant sectors, ultimately leading to the observed inverted U-shaped impact. Further analysis uses the implementation of real estate purchase restrictions in 46 cities as a quasi-natural experiment of financial “virtualization to reality”. Employing a difference-in-differences methodology combined with counterfactual analysis, the empirical results demonstrate that supply-side structural reforms and the reallocation of financial resources are mutually complementary in improving the efficiency of financial services for the real economy. Furthermore, the exit of “zombie firms” substantially enhances the efficiency of financial services within the real economy. This study offers valuable implications for guiding manufacturing enterprises to refocus on their core operations, optimizing economic structures, and advancing supply-side structural reforms.