Understanding the effects on corporate performance of investments in wealth management products

Abstract We evaluate how purchases of wealth management products (WMPs) influence the performance of Chinese nonfinancial listed companies. Our main finding is that purchasing WMPs enhances firm performance, but the relation shows an inverted U‐shape: When WMP investment exceeds 62.57% of total assets, its positive effects diminish and ultimately harm performance. Heterogeneity analysis reveals that the performance gains are concentrated among non‐state‐owned enterprises (non‐SOEs), whereas state‐owned enterprises (SOEs) experience no significant benefits or even negative effects. Furthermore, the positive impact of WMPs is more pronounced in firms with higher leverage, abundant cash holdings, or lower top‐shareholder concentration.