Peer Effect of Corporate Financialization: Based on Interlocking Director Networks

In recent years, the trend of corporate financialization has become increasingly evident, with many non-financial corporations investing large amounts of capital in high-yield, fast-returning areas such as financial markets and real estate. According to the CSMAR database, the share of companies holding financial assets among non-financial listed companies in China was well over 80% during 2006-2020 and reached a stage peak of 91.2% in 2017. In addition, the level of financialization of companies is steady at 5%-7%, and the ratio of profits from financial channels to EBITDA basically remains at 14%-17%. That is, financial assets have become an essential asset component for the entity, while profitability from financial assets has become an important complementary channel for its profits. Previous studies have revealed the motivations(Baud & Durand, 2012; Duchin et al., 2017; Hu et al., 2017; Xiong & Gui, 2019), influencing factors(Du et al., 2019; Gunnoe, 2016; Peng et al., 2018; Perillo & Battiston, 2020; Wu & Bai, 2019; Zou, 2018), and economic consequences(Du et al., 2017; Liu et al., 2019; Xu, 2021) of corporate financialization. However, scholars also point out that because corporations exist in a social environment, managers' behavioral decisions are influenced not only by factors within the corporation itself, but also by peer corporations interlocked because of social networks. They refer to this rational, selective, non-blind herding phenomenon of referring to peer corporations to help their own behavioral decisions as the peer effect of corporate behavior(Almazan et al., 2010; Manski, 1993; Shue, 2013; Lu & Chang, 2018; Yi et al., 2019).