The Impact of Financial Asset Allocation on Firms’ Total Factor Productivity: Evidence from China’s Non-Financial Companies

As a core business strategy, sustainability has become increasingly important in today’s rapidly evolving world. The improvement of a firm’s total factor productivity (TFP) is necessary for the realization of sustainable development. The wide variation in the types and sizes of China’s firms can reflect the differences in financial capital allocation among firms. In addition, as the second largest economy in the world, China has a large number of firm data to be examined. Based on this, this paper selects China’s A-share non-financial listed companies from 2010 to 2023 as research samples to empirically test the impact of financial asset allocation on the TFP of firms. It is found that excessive financialization negatively affects both TFP and innovation, but that innovation can increase TFP, thus weakening the negative impact of financialization on TFP. Therefore, to enhance the productivity of firms and reach the sustainability of development, firms should invest more in innovation and reduce the level of financialization. By emphasizing innovation, firms can promote the application of green technologies and the production of green products, and achieve win–win economic and social benefits while protecting the environment, and sustainability can be realized.