The Effect of CEO Social Capital and Duality on Financialization of Listed Enterprises

Abstract

Businesses are looking for new ways to grow as traditional industries get crowded, and their growth has slowed. Financial investment is a tactic that allows businesses to enter more profitable marketplaces and investment sectors. The increasing reliance of non-financial organizations on financial markets and instruments for asset allocation structures, portfolio selection, and profit production is thus referred to as the "financialization of firms." Recent research has examined the macro-policy and micro-firm aspects affecting corporate financialization. However, the literature now in publication frequently ignores the complexity of financialization, especially the underlying factors that stem from the firm's decision-making structure. Few academics have examined how managers' backgrounds may affect business financialization. This study's main issue is: How much can CEO social capital help or hinder company financialization, and how can this effect be realized? This study uses panel data from 100 Chinese listed enterprises at the Shanghai Stock Exchange from 2015 to 2024 to analyse the effect of corporate governance factors (Duality and social capital of CEO) on corporate financialization. Using panel econometric models, it was discovered that increased CEO social capital accelerates business financialization. This link remains strong after considering robustness and endogeneity problems. Furthermore, the results of the mediation effect show that financial limitations partially mediate the relationship between CEO social capital, duality, and business. It was also shown that CEO social capital and duality enhance financing limitations, accelerating financialization. These findings contribute to our understanding of the determinants of corporate financialization, with suggestions for policy and governance. Although more research is required, this study has significantly contributed to the present knowledge of the intricate relationships between CEO social capital and corporate financialization.