1. Introduction
At present, the global economy has gone through a downward trend. Affected by economic transformation and the COVID-19 pandemic, the Chinese economy has been in a downturn for a long time. This poses an unprecedented test to the sustainable development of enterprises. In the context of deepening trade and financial globalization, traditional productive industries’ profit rates are declining, which dramatically weakens enterprises’ enthusiasm for investment in the real economy. However, the financial sectors, especially the banking sector, have higher yields due to policy advantages related to monopoly positions and interest rate regulations. Enterprises are willing to increase the proportion of financial assets in their investment structure. As a result, many entity enterprises attempt to enter the financial sector, real estate, and other fields to obtain higher profits, which has led to the “shift from the real economy to the virtual economy” phenomenon in China. The US economic crisis in 2008 provided a lesson for our country. Excessive concentration of capital in the financial sector accumulates huge financial risks, which seriously hinders the development of real economy and the stability of the economic system. Development of the world economy has proved that we must balance the relationship between the real and virtual economies and promote the virtual economy to serve the real economy to achieve sustained and steady economic growth.
Corporate financialization is an increasingly common phenomenon (Crotty, 2005; Krippner, 2005; Lapavitsas, 2011) [
1,
2,
3]. Krippner (2005) [
2] defines financialization as a pattern of accumulation in which profit-making increases through financial channels rather than through trade and commodity production. At the macro level, the “shift from real economy to virtual economy” shows that financial resources circulate within the financial system and deviate from serving the real economy. At the micro level, it demonstrates that the entity enterprises increase the level of financial asset allocation and reduce the proportion of operating asset investment. Palley (2013) [
4] shows that financialization leads to a reallocation of resources from physical investment toward financial investment.
There are two opinions about the relationship between financialization and enterprise development. Hu et al. (2017) [
5] claim that, in line with “precautionary savings motivation”, firms might choose to invest financial assets in an easing financial condition and sell them in a tight financial condition to adjust their liquidity level. On the other hand, Orhangazi (2008) [
6] and Krippner (2005) [
2] believe that based on “profit-seeking motivation,” the financialization of entity enterprises will produce a “crowding out effect” on the main business of enterprises. Since different financial motivations lead to different consequences, it is necessary to explore the drivers of financialization. Scholars have identified several factors that influence investment in corporate financial assets: the profit crisis in the manufacturing sector (Krippner, 2005; Demir, 2009) [
2,
7], the change in the concept of corporate governance (Lazonick, 2010) [
8], and the pressure of shareholder value (Lazonick and Sullivan, 2002) [
9]. From the macro policy perspective, scholars have explored economic policy uncertainty’s impact on enterprise financialization (Peng et al. (2018)) [
10]. However, few studies have examined the shaping of implicit factors, such as the impact of social culture values on investment preferences in enterprises. In fact, corporations closely interact with their local environment through local employees, customers, and suppliers. Therefore, companies are subject to soft cultural constraints. Harrison and Huntington (2013) [
11] have identified culture as a key factor affecting society, politics, and the economy. In addition, the emergence of behavioral finance in recent years demonstrates the important impact of both formal and informal institutional factors, such as culture, on enterprise behavior (Griffin et al. (2012); Hilary and Hui, 2009) [
12,
13].
Gambling culture can reflect a population’s speculative tendency or mirror the adventurous spirit of people in a region. As a result, enterprise managers may be affected by the local gambling culture and invest in high-risk projects (Manso, 2011) [
14]. Chen et al. (2014) [
15] showed that companies in areas with a high propensity to gamble tend to undertake more speculative and risky projects. Inspired by this observation, we have reasons to speculate that under the influence of gambling culture, enterprises may pay more attention to investing in real estate and the financial industry with short-term excess returns and higher risk. Real enterprises attempt to improve corporate performance by conducting arbitrage projects through financial asset allocation, which would further aggravate the financial biases. Given this, we attempt to fill a gap in the literature by exploring the high-risk and high-return relationship between gambling culture and corporate financial assets.
We used A-listed shares on the main boards of the Shanghai and Shenzhen Stock exchanges from 2008 to 2020 to verify the impact of gambling culture on corporate financialization. The results showed that the gambling culture increases the likelihood of the enterprise holding financial asset investments through enhanced confidence level in management. After a robustness test using the instrumental variable method and variable substitution method, the results were still credible. Heterogeneity tests showed that the influence coefficient of gambling culture on corporate financialization is relatively larger for companies facing low economic policy uncertainty, those under high performance pressure, and those that are state-owned. This study makes the following contributions.
First, previous literature mainly focuses on the effect of formal institution factors such as the external environment and management characteristics on corporate financialization. However, few studies have examined how informal institutions affect investment decisions of financial assets. A few scholars have verified the influence of corporate social responsibility (Liu et al. (2019)) [
16] and social credit (Xiang et al. (2021)) [
17] on corporate business behavior from the perspective of informal institutions. We take gambling culture as a representative variable of informal institutions and explore cultural values’ impact on corporate decision making. This research adds a new perspective on factors that impact corporate financialization.
Second, most studies on gambling culture examine how investors’ speculative tendencies affect the stock price performance of enterprises in the capital market (Kumar, 2009; Kumar et al. (2011); Ji et al. (2021); Zheng and Sun, 2013) [
18,
19,
20,
21]. Some studies have also found that a gambling culture would affect micro-enterprises’ merger and acquisition decisions (Doukas and Zhang, 2013) [
22], innovation investments (Chen et al. (2014); Adhikari and Agrawal, 2016) [
15,
23], and financial information disclosure (Christensen et al. (2018)) [
24]. This study regards gambling culture as a non-institutional factor and examines its unique role in corporate investment. Our research deepens the understanding of the economic effect of gambling culture from the micro-enterprise decision-making perspective.
Third, the findings indicate that a robust gambling culture environment increases the allocation of enterprises’ financial assets, implying that the social and cultural environment is closely related to micro-entity enterprises’ investment and financing tendencies. Our research provides a reference for Chinese enterprises to achieve sustainable and healthy development within an economical and cultural environment. These findings can help alleviate the problem of corporate financialization and thus achieve sustainable development.
The remainder of this paper is structured as follows. We review the previous literature, develop the research hypotheses, and then provide the data and estimation method in the
Section 2. The
Section 3 provides the empirical results. The
Section 4 presents a further analysis, including the subdivision testing of financial assets and heterogeneity tests. Conclusion and enlightenments are provided in the
Section 5.
5. Conclusions
This study examined the effect of gambling culture on the financialization of non-financial corporations by using 24,902 sets of firm-year data on listed Chinese companies from 2008 to 2020. We can draw the following conclusions. Firstly, our empirical results support the hypothesis that gambling culture could facilitate corporate financialization. The stronger the gambling culture, the higher the degree of financialization. The results are still significant after controlling for the industry-fixed and year-fixed effects. To ensure the reliability of the conclusion, we conducted the robustness test utilizing the instrumental variable method and the substituting key variables, and the conclusion remained valid. Secondly, further investigation revealed that gambling culture affects corporate financial asset investment by enhancing management overconfidence. Thirdly, by subdividing financial assets, we found that gambling culture promotes the holdings of profit-driven financial assets. Heterogeneity tests show that economic policy uncertainty, corporate performance pressure, and corporate property right attribution play moderating roles in the relationship between gambling culture and corporate financial asset investment.
We demonstrated empirical evidence on how cultural elements drive corporate financialization. Based on the research findings, we derive the following insights. Policymakers should strengthen socialist cultural construction and try to alleviate the negative impacts of gambling culture as much as possible. The state should foster mainstream culture and values and create a cultural atmosphere of working hard to rejuvenate the country, which can inspire people’s spirit of hard work, curb the tendency of speculation, and promote the development of high-quality enterprises. In addition, according to the analysis of this paper, the over-financialization of enterprises results from management’s motivations to satisfy personal interests. The management would invest in the high-risk and high-profit virtual industry at the expense of the enterprise’s primary business development capital. From the corporation’s perspective, the board of directors and supervisors should design a reasonable compensation incentive system and strengthen the supervisory role. The appropriate manager’s incentive design could enhance the corporate governance effect and optimizes the enterprise’s resource allocation.