Financialization Phenomenon Trend and its Impact on the Non-Financial Firms' Growth in Tehran Stock Exchange

Document Type : Original Article

Author

damghan university

Abstract

Observing the investment behavior of firms in different sectors of the economy indicates the financialization phenomenon; A phenomenon in which characterized primarily by the desire to earn more profit through financial markets rather than through real economy, and secondly the increasing of financial payments to shareholders and the banking system. The purpose of this research is to investigate and answer the question of whether the phenomenon of financialization can affect the return on assets of firms as an indicator of firms' growth. To answer this question, FMOLS and DOLS panel data models were used to examine the effect of firms' financialization behavior on their growth. The data include financial information of 191 non-financial firms in 17 groups listed in Tehran Stock Exchange during the period of 1379-1399. The findings of this study indicate that, firstly, with the increase in financial payments, the growth of firms has increased, and secondly, with an increase in financial income, their growth has declined.

Keywords

References

Audretsch, D. B. and J. A. Elston (2002). Does Firm Size Matter? Evidence on the Impact of Liquidity Constraints on Firm Investment Behavior in Germany,  International Journal of Industrial Organization, 20 (1), 1-17.
Auvray, T., & Rabinovich, J. (2019). The financialisation–offshoring nexus and the capital accumulation of US non-financial firms. Cambridge Journal of Economics, 43(5), 1183-1218.
Ayyagari, M. & Demirguc-Kunt, A. & Maksimovic, V. (2008). How Important Are Financing Constraints? The Role of Finance in the Business Environment. The world bank economic review, 22 (3), 483-516.
Bai, J., and Kao, C. (2006). On the Estimation and Inference of a Panel Cointegration Model with Cross-Sectional Dependence. Contributions to Economic Analysis, edited by Badi Baltagi, Elsevier.
Baltagi, B. H. (2005). Econometric Analysis of Panel Data. 3rd ed. England: John Wiley and Sons, Ltd.
Becchetti, L. & Trovato, G. (2002). The Determinants of Growth for Small and Medium Sized Firms. The Role of the Availability of External Finance. Small Business Economics, 19 (4), 291-306.
Beck, T., Demirgüç-Kunt, A., & Maksimovic, V. (2005). Financial and Legal Constraint to Growth: Does Size Matter? Journal of Finance, 60 (1), 137-177.
Butler, A. W., & Cornaggia, J. (2007). Does access to finance improve productivity? Evidence from a natural experiment. Dallas School of Management.
Butters, J. Keith, and John Lintner. (1945). Effect of Federal Taxes on Growing Enterprises. Boston: Harvard University.
Cabral, L.M.B. and J. Mata (2003). On the Evolution of the Firm Size Distribution: Facts and Theory. American Economic Review,93(4) 1075-1090.
Carrizosa, M. T. (2007). Firm growth, persistence and multiplicity of equilibria: an analysis of Spanish manufacturing and service industries (Doctoral dissertation, Universitat Rovira i Virgili).
Chudik, A., and Pesaran H.M. (2015). Common Correlated Effects Estimation of Heterogeneous Dynamic Panel Data Models with Weakly Exogenous Regressions. Journal of Econometrics, 188 (2), 393-420.
Delmar, F. (1997). Measuring growth: Methodological considerations and empirical results. In R. Donckels & A. Miettinen (Eds.), Entrepreneurship and SME research: On its way to the next millennium (pp. 190–216). Aldershot, UK and Brookfield, VA: Ashgate.
Demirgüç-Kunt, A., & Maksimovic, V. (1988). Law, Finance and Firm Growth. Journal of Finance, 53 (6), 2107-2137.
Demirguc-Kunt, A., Love, I., & Maksimovic, V. (2006). Business environment and the incorporation decision. Journal of Banking & Finance, 30(11), 2967-2993.
Eckhard, H. (2012). Finance-Dominated Capitalism, Capital Accumulation and Macroeconomic Regimes. The Macroeconomics of Finance-Dominated Capitalism – and its Crisis. Cheltenham, UK, 'Edward Elgar Publishing, Inc.
Evans, D.S. and B. Jovanovic (1989). An Estimated Model of Entrepreneurial Choice under Liquidity Constraints. Journal of Political Economy, 97(4), 808-827.
Fazzari, S., Hubbard, R., & Petersen B. (1988). Financing Constraints and Corporate Investment. Brookings Papers on Economic Activity.
Fowowe, B. (2017). Access to finance and firm performance: Evidence from African countries. Review of development finance, 7(1), 6-17.
Gagliardi, F. (2009). Financial Development and the Growth of Cooperative Firms. Small Business Economics, 32 (4), 439-464.
Girma, S., Gong, Y., & Görg, H. (2008). Foreign direct investment, access to finance, and innovation activity in Chinese enterprises. The World Bank Economic Review, 22(2), 367-382.
Im, K.S, Pesaran, M.  H.  and Shin, Y. (2003). Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, 115(1), 53-74.
Kao, C. (1999). Spurious Regression and Residual-Based Tests for Co integration in Panel Data. Journal of Econometrics, 90(1), 1-44.
Krippner, G. R. (2005). The Financialization of the American Economy. Socio- economic Review, 3 (2), 173-208.
Lazonick, W., & O'Sullivan, M. (2000). Maximizing Shareholder Value: A New Ideology for Corporate Governance. Economy and Society, 29(1) 13-35.
Levin, A.; Lin, C.F. and Chu, C. J. (2002). Unit Root Tests in Panel Data: Asymptotic Finite-Sample Properties. Journal of econometrics, 108(1), 1-24.
Levine, R. (2005). Finance and growth: theory and evidence. Handbook of economic growth, 1, 865-934.
Marris, R. and A. Wood (eds.) (1971). The Corporate Economy-Growth, Competition and Innovative Potential. Harvard University Press.
Oliveira, B. & Fortunato, A. (2006)."Firm Growth and Liquidity Constraints: A Dynamic Analysis. Small Business Economics, 27(2-3), 139-156.
Orhangazi, O. (2008). Financialization and Capital Accumulation in the Non-Financial Corporate Sector: A Theoretical and Empirical Investigation on the US Economy. Cambridge Journal of Economics, 32(6), 863-886.
Pedroni, P. (2004). Panel Cointegration, Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis. Econometric Theory, 20(3), 597-625.
Pesaran, M.H. (2007). A Simple Panel Unit Root Test in the Presence of Cross-Section Dependence. Journal of Applied Econometrics 22(2), 265-312.
Rahaman, M. M. (2011). Access to financing and firm growth. Journal of Banking & Finance, 35(3), 709-723.
Rajan, R., & Zingales, L. (1998). Financial development and growth. American Economic Review, 88(3), 559-586.
Sarafidis, V., and Wansbeek, T. (2012). Cross-Sectional Dependence in Panel Data Analysis. Econometric Reviews, 31(5), 483-531.
Tobin, J. (1965). Money and Economic Growth. Econometrica, 671-684.
Tori, D & Onaran, Ö. (2018). The Effects of Financialization on Investment: Evidence from Firm-Level Data for the UK. Cambridge Journal of Economics, 42(5), 1393-1416.
Tori, D & Onaran, Ö. (2020). Financialization, financial development and investment. Evidence from European non-financial corporations. Socio-Economic Review, 18(3), 681-718.
Westerlund, J. (2007). Testing for Error Correction in Panel Data. Oxford Bulletin of Economics and Statistics, 69(6), 709-748.
Economic Strategy
Volume 11, Issue 41 - Serial Number 41
September 2022
Pages 93-118

Files

Share

How to cite

Statistics