Financial Asset Investment and Real Economy “Crowding Out” Effect
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| Title | Financial Asset Investment and Real Economy “Crowding Out” Effect
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| Author | Hu Yiming,Wang Xueting and Zhang Jin |
| Organization | Shanghai Jiao Tong University; Nanyang Technological University |
| Email | huym@sjtu.edu.cn；conniefish@sjtu.edu.cn；JZHANG036@e.ntu.edu.sg |
| Key Words | financial asset investment; real economy investment; crowding out effect |
| Abstract | The recently booming financial industry in China has attracted increasing attention regarding whether such rapid financial development and expansion have crowded out the “real economy” in firms. Using data from China’s nonfinancial listed companies, we study how macroeconomic factors affect financial asset allocation from the aspect of the reservoir motivation and the substitution motivation. We find that: 1) financial asset investment is lower for tighter monetary policy and for a booming stock market, indicating that the reservoir motivation is stronger; 2) Firms increase financial asset investment and decrease operating asset investment when the economy is going up, that is, the substitution motivation is stronger; 3) financial asset investment is higher when the company’s operation and financial status are better, indicating stronger substitution motivation. The above findings is meaningful to macroeconomic policy makers in that we should pay attention to the return difference between financial asset and operating asset and avoid excessive substitution of financial asset investment for the real economy investment. |
| Serial Number | WP999 |
| Time | 2015-12-22 |
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