Research on the impact of corporate financialization on debt financing level: From the dual perspectives of risk-taking and earnings management

This study investigates the impact of corporate financialization on firms' debt financing decisions using a panel dataset of Chinese A-share listed companies from 2007 to 2023. Employing firm- and year-fixed effects regression models, we find that higher financial asset holdings are significantly associated with lower levels of debt financing. Robustness is ensured through various tests, including lagged variable models, propensity score matching, the Heckman two-step correction, and alternative fixed effect specifications. Mechanism analysis reveals that financialization reduces debt usage by increasing firms' risk-taking behavior and decreasing earnings management. Moreover, heterogeneity analysis shows that the effect is more pronounced among state-owned enterprises and firms receiving higher levels of external monitoring, such as analyst coverage. These findings suggest that financialization not only alters firms’ financial structures but also reshapes internal governance and risk preferences.