The Impact of Sudden Stop in International Capital Flow on the Allocation of Financial Assets of Enterprises
The spillover effects of international capital fluctuations have emerged as a new conduit for the transmission of systemic risks among countries.Among the various types of capital flow shocks,the most detrimental is the sudden stop shock.At the same time,the allocation of financial assets has become a suboptimal option for enterprises confronted with the sluggishness of the real economy.Considering that international capital has a strong profit-seeking nature,does the sudden stop shock affect the allocation of financial assets by enterprises?Are there any disparities in this impact under different moti-vations for financial asset allocation?These questions are of paramount importance in clarifying the underlying logic of enter-prises'financial asset allocation against the background of the macroeconomic downturn.Based on the quarterly data of A-share markets listed companies in China from 2007 to 2021,this paper investigates the influence and the channels of the sudden stop on the financial asset allocation of listed enterprises.The research findings are as follows:The sudden stops will reduce the holdings of financial assets by enterprises but increase the profits from financial as-sets,and this influence is persistent;The sudden stop prompts enterprises to reduce their holdings of financial assets by elevat-ing credit costs and lowering asset prices,while the increase in agency costs and the reduction in fixed asset investment contrib-ute to the profits from financial assets;The sudden stop shock reduces enterprises'preference for short-term financial asset holdings,while exerting the opposite effect on long-term financial assets.The policy implications are as follows.Firstly,the monetary authorities should employ big data and artificial intelligence technologies to enhance real-time,dynamic,and penetrating supervision of the international capital flows,and prevent exces-sive diversion of real investment into the financial field.Secondly,taking the proportion of financial asset holdings and the prof-its from financial assets as the regulatory indicators of the degree of enterprises'distracting from their intended purpose,and setting the red line for the credit orientation of financial institutions.Thirdly,develop a multi-level capital market,and reduce enterprises'reliance on external debt financing.Fourthly,open up financing channels such as collateralized financing for digi-tal and patent assets of enterprises,and utilize technological innovation fund collateral guarantees to solve the problem of ex-pensive financing for enterprises.Fifthly,strengthen the construction of the capital market,give full play to the fundamental functions of price discovery and resource allocation,and conduct external effective supervision of enterprises through the infor-mation disclosure mechanism to alleviate the degree of financialization of enterprises driven by short-term profit motives.
Sudden Stop in International Capital FlowFinancial Asset AllocationCredit CostAsset PriceCapital Control
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