We aim to investigate the dynamic determinants of corporate financialization of publicly listed non-financial companies, particularly in the context of firm-specific characteristics, national governance quality, and macroeconomic risk indicators of economies. The overall objective of the research is to inspect corporate financial assets allocation strategies of non-financial corporations in the context of an uncertain economic environment and varying levels of governance quality.
The paper employs a dynamic approach based on panel data, namely the system generalized method of moments (System-GMM) estimation technique, to account for possible endogeneity problems as well as the persistence of financialization behavior. Statistical analysis was conducted for the time period of 2016 to 2024, comprising 151 non-financial companies listed in India.
We find a high level of persistence within corporate financialization strategies. In addition, financialization has a nonlinear relationship with policy uncertainty, and the findings suggest that robust national governance reduces excessive financialization and cushions its negative effects. Further, sectoral patterns demonstrate that capital-intensive industries, such as energy and materials, are the least financialized, further supporting the notion that tangible asset-heavy sectors participate less in the phenomenon of financialization.
This paper extends the limited literature on corporate financialization in emerging markets by using a dynamic framework to investigate governance and economic policy uncertainty. It offers new insights into firm strategy, public policy, and sectoral patterns for financial activities.
