Understanding the Economic Shifting “from Real to Virtual”from the Micro Perspective: A Literature Review of Corporate Financialization

Dai Ze; Peng Yuchao; Ma Sichao

doi:doi:10.16538/j.cnki.fem.2018.11.003

Summary

From the perspective of micro enterprises, this paper reviews the frontier research on enterprise finance, analyzes the differences in the concept of economic finance and enterprise finance, divides the different types of enterprise finance, and analyzes the different causes of enterprise finance and its different impacts on economic development. Firstly, according to the definition of enterprise finance, we can come into the two aspects of profits and assets to measure the degree of enterprises engaged in financial investment activities. In general, the higher the financial degree of enterprises is, the higher the proportion of financial assets held in the total assets is, and the higher the proportion of the income obtained through financial investment to the total profit is. By directly using the detailed data of enterprise balance sheet and profit statement, we can measure the degree of corporate finance.　　Secondly, through the study of different views, we divide the relevant explanations of the motivation of enterprise finance into three categories:" reservoir”theory, " investment substitution”theory and" entity intermediary”theory." Reservoir”theory holds that the purpose of enterprises to hold financial assets is the liquidity reserve to prevent the break risk of the capital chain caused by the cash flow impact." Investment substitution”theory holds that the purpose of enterprises’ finance is to maximize the profit, so that when the yield of financial investment is higher than the real economic investment, enterprises are more profitable. It will replace the real economic investment with the investment of financial assets." Entity intermediary”theory holds that because of the existence of banks’ financing discrimination, some enterprises are easy to obtain funds from banks, but the production efficiency is low, so the money is obtained from banks and then transferred to other enterprises, that is, non-financial enterprises engage in business similar to financial intermediaries. 　　In general, although the economy is" debased and virtual”, which is not conducive to economic development and economic stability, corporate finance is not without merit. It is worth emphasizing that different types of corporate finance have different effects on economic development. Enterprise finance, which is caused by the decline of the profit rate of the real economy and the asset price bubble, is not conducive to the stability of the financial system and the healthy development of the economy. Corporate finance is the financing of service entities, which will contribute to economic development.　　Finally, we should distinguish between the two kinds of corporate financial behavior with different motives. For enterprises that are motivated by savings, policy support should be given to them; while policy control should be given to enterprises motivated by speculations.