Research Article
Research on Corporate Financialization and Idiosyncratic Risk Based on Fixed-effect Models
@INPROCEEDINGS{10.4108/eai.18-11-2022.2326938, author={Hejin Chen and Zhenghao Sun}, title={Research on Corporate Financialization and Idiosyncratic Risk Based on Fixed-effect Models}, proceedings={Proceedings of the 4th International Conference on Economic Management and Model Engineering, ICEMME 2022, November 18-20, 2022, Nanjing, China}, publisher={EAI}, proceedings_a={ICEMME}, year={2023}, month={2}, keywords={corporate financialization; idiosyncratic volatility}, doi={10.4108/eai.18-11-2022.2326938} }- Hejin Chen
Zhenghao Sun
Year: 2023
Research on Corporate Financialization and Idiosyncratic Risk Based on Fixed-effect Models
ICEMME
EAI
DOI: 10.4108/eai.18-11-2022.2326938
Abstract
In this paper, the Fama and French three-factor models were firstly used for monthly regression, and finally the monthly standard deviation of the daily residual was finally obtained as the measure of idiosyncratic volatility. This paper explores the impact of corporate financialization on idiosyncratic volatility based on dual fixed-effect models. According to the results, corporate financialization has an inhibiting effect on idiosyncratic volatility. Moreover, the impact of corporate financialization on idiosyncratic volatility is more significant in large market capitalization, high institutional investor ownership, high return on assets and non-state-owned enterprises. This association was robust across a wide range of robustness tests, which is verified in our analysis, including using fixed-effect models and other control variables. These results shed light for the financialization of non-financialized entity firms is the current trend of financial development, because the corporate financialization can restrain idiosyncretic risk.