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How does corporate financialization affect operational risk? Evidence from Chinese listed companies

Author

Listed:
  • Mingjun Deng
  • Xusheng Fang
  • Qinke Lyu
  • Wenbing Luo

Abstract

Using a sample of China’s non-financial listed companies from 2009 to 2020, this paper examines the impact of corporate financialization on operational risk. Our results show that there is a positive relationship between corporate financialization and operational risk, indicating that the risk amplification effect of corporate financialization is dominant, and this effect is more pronounced among companies with higher financing constraints. The analysis of the impact mechanism shows that corporate financialization fails to alleviate underinvestment by means of capital ‘reservoir’, but will lead to an increase in operational risk by damaging the profitability of the company’s main business. In addition, we find that product market competition mitigates the risk amplification effect of corporate financialization. The conclusions of this paper have certain significance for the government and corporations to understand the microeconomic consequences of financialization.

Suggested Citation

  • Mingjun Deng & Xusheng Fang & Qinke Lyu & Wenbing Luo, 2023. "How does corporate financialization affect operational risk? Evidence from Chinese listed companies," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 36(3), pages 1-21, December.
    • Handle: RePEc:taf:reroxx:v:36:y:2023:i:3:p:1-21
    DOI: 10.1080/1331677X.2023.2165526
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    Citations

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    Cited by:

    1. Ju, Chunhua & Fang, Xusheng & Shen, Zhonghua, 2024. "Investor attention and corporate financialization: Evidence from internet search volume," International Review of Financial Analysis, Elsevier, vol. 96(PA).
    2. Roy, Tonoy & Bhuiyan, Rubaiyat Ahsan & Ahmed, Sarwar Uddin & Abdullah, Mohammad, 2024. "Geopolitical conflict and firm bankruptcy risk," Finance Research Letters, Elsevier, vol. 68(C).
    3. Guo, Juanjuan & Sun, Hongfeng & Wang, Shihao & Liu, Chang, 2025. "Sword suppress virtual fire: Bank regulatory sanctions help companies shift from financial to real economic activities," International Review of Financial Analysis, Elsevier, vol. 108(PB).
    4. Jin, Jian & Xu, Su & Gao, Bei, 2025. "Can energy efficiency credit guidelines boost enterprises' low-carbon technological innovation? Evidence from China," Energy Economics, Elsevier, vol. 150(C).
    5. Wenwen Li & Shuo Fang & Chenran Yan & Qian Li & Weifeng Gong & Chuanhui Wang, 2026. "Impact of corporate financialization on carbon cost efficiency of thermal power enterprises in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 28(1), pages 2595-2630, January.
    6. Xinyan Xu & Jieyu Li & Jianming Zheng, 2025. "China’s Industry–Finance Collaboration Pilot in Stimulating Corporate Green Innovation," Sustainability, MDPI, vol. 17(10), pages 1-25, May.
    7. Jin, Jian & Gao, Bei, 2025. "Going with the flow or standing by: Managerial climate risk perception bias and corporate green transformation — Evidence from China," Energy Economics, Elsevier, vol. 148(C).
    8. He, Yuyou, 2025. "Digital Transformation and Enterprise Financialization: A discussion on the mechanism of action," Finance Research Letters, Elsevier, vol. 86(PG).

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