Description:
This study examines the exogenous institutional impact of minimum wage policy on enterprise financialization in China. Empirical results show that an increased minimum wage significantly promotes the financialization of real enterprises. Moreover, the impact is more pronounced in enterprises characterised by a more significant profit margin gap between tangible and financial assets and higher degrees of labour-intensiveness. Further tests reveal that the promotional effect of the minimum wage on the financialization of labour-intensive enterprises tends to be more substantial under the following circumstances: (i) a smaller gap exists between an enterprise's average wage and the local minimum wage; (ii) an enterprise finds it more challenging to pass on costs to the market; (iii) following the implementation of the Labour Contract Law. Further investigation indicates that raising the minimum wage exacerbates the adverse effects of enterprise financialization on corporate value.