Inverted U-shaped impact of financialization on private enterprise business performance: Capital structure threshold effect

Abstract

Using data from China's A-share listed private enterprises from 2013 to 2022, this study empirically examines the mechanisms by which financialization influences the business performance of private firms. Findings reveal that financialization has a significant inverted U-shaped effect on the business performance of private enterprises and corporate capital structure functions as a threshold variable that moderates the relationship between financialization and business performance. Additionally, the effects of financialization vary across firms depending on industry, size, capital demand, and level of technological innovation. These findings offer important implications for policymaking and implementation efforts aimed at advancing the modernization of private enterprises.