• Chien-Chiang Lee National Sun Yat-sen University
  • Guanchun Liu Shanghai University
Keywords: Financialization; Capital accumulation; Polynomial inverse lag; China


Using the semi-annual data of listed nonfinancial corporations from 2007 to 2015, this paper investigates the effect of financialization on capital accumulation in China. The results show that increased financial profit crowds out real investment, especially for small and private firms. Furthermore, the effect of financialization reverts to be positive in the long run, and its cumulative effect manifests a “U-type” pattern.


Arellano, M., Bover, O., 1995. Another look at the instrumental-variable estimation of error-components models. Journal of Econometrics, 68(1), 29-51.
Arrighi, G., 1994. The Long Twentieth Century: Money, Power, and the Origins of Our Times. London: Verso Press.
Blundell, R., Bond, S., 1998. Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115-143.
Brown, J.R., Petersen, B.C., 2011. Cash holding and R&D smoothing. Journal of Corporate Finance, 17(4), 694-709.
Chaney, T., Sraer, D., Thesmar, D., 2012. The collateral channel: How real estate shocks affect corporate investment. American Economic Review, 102(6), 2381-2409.
Demir, F., 2009. Financial liberalization, private investment and portfolio choice: Financialization of real sectors in emerging markets. Journal of Development Economics, 88(2), 314-324.
Kliman, A., Williams, S., 2015. Why ‘financialization’ hasn’t depressed U.S. productive investment? Cambridge Journal of Economics, 39(1), 67-92.
Lazonick, W., O’Sullivan, M., 2000. Maximizing shareholder value: A new ideology for corporate governance. Economy and Society, 29(1), 13-35.
Mitchell, D.W., Speaker, P.J., 1986. A simple, flexible distributed lag technique: The Polynomial inverse lag. Journal of Econometrics, 31(3), 329-340.
Orhangazi, Ö, 2008. Financialisation and capital accumulation in the non-financial corporate sector: A theoretical and empirical investigation on the US economy: 1973–2003. Cambridge Journal of Economics, 32(6), 863-886.
Smith, C.W., Stulz, R.M., 1985. The determinants of firms’ hedging policies. Journal of Financial and Quantitative Analysis, 20(4), 391-405.
Stockhammer, E., 2004. Financialization and the slowdown of accumulation. Cambridge Journal of Economics, 28(5), 719-741.
Tobin, J., 1965. Money and economic growth. Econometrica, 33(4), 671-684.
Tornell, A., 1990. Real vs. financial investment: Can Tobin taxes eliminate the irreversibility distortion? Journal of Development Economics, 32(2), 419-444.