Does Economic Policy Uncertainty Inhibit or Promote Firm Financialization? New Perspective on Financial Motivation

ABSTRACT From the perspective of financialization motivation, this study empirically investigates the impact and mechanism of economic policy uncertainty on firm financialization using data from China's A‐share listed firms from 2010 to 2021. The results show that economic policy uncertainty has a positive effect on firm financialization, and the effect is more significant when uncertainty is high. Moreover, economic policy uncertainty promotes firm financialization by enhancing the “precautionary saving” motivation and inhibits firm financialization by alleviating the “profit chasing” motivation, and the “precautionary saving” motivation has a greater impact. Both financing constraints and executive financial experience play a positive moderation role. And there is heterogeneity in financial asset categories and marketization degree.