Customer Geographical Proximity and Corporate Financialisation: Evidence From China

ABSTRACT This study examines the impact of customer geographical proximity on corporate financialisation. The results show that customer geographical proximity exacerbates corporate financialisation rather than alleviates it. Moreover, this impact can be achieved by reducing corporate profitability and enhancing the turnover of firms' working capital. Furthermore, the findings also suggest that the impact of customer geographical proximity on corporate financialisation is more pronounced in firms with higher levels of earnings management, whereas good corporate governance can help to reduce this effect. Our study provides substantial evidence for understanding corporate financialisation at the supply chain level and offers specific policy implications for the governance of corporate financialisation.