Corporate Investment Slowdowns in the Context of Financialization: Firm-level Evidence from Poland

ABSTRACT

This paper explores two channels through which financialization affects corporate investments: institutional ownership and shareholder value orientation. Employing the GLMM approach, we analyze firm-level data of companies listed on the Warsaw Stock Exchange and identify a significantly negative relationship between financialization-related factors and fixed investments. Specifically, the results suggest that both institutional investors and profit distribution to shareholders inhibit corporate investments in Poland. Notably, foreign, corporate, and large individual shareholders may also influence investment activity by implementing a shareholder value creation strategy.

KEYWORDS:

• Corporate investments
• financialization
• shareholder value

Acknowledgments

We are grateful to two anonymous referees for valuable comments and suggestions.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1. For instance, until 2014 Polish regulations governing open pension funds included a mechanism for financing the fund’s shortfall. This occurred when the 24-month rate of return of the fund, calculated quarterly, was lower than the minimum return defined as a rate of return 50% lower than the weighted average rate of return of all open pension funds in that period. In the event of such a shortfall, the pension fund was obliged to cover it with reserves or its own capital, constituting a form of financial penalty for relative underperformance. Naturally, this solution was beneficial for savers, but at the same time, it promoted greater concern for short-term outcomes, which might have broader ramifications, including an impact on corporate strategic decisions.

Additional information

Funding

This work was supported by the Ministry of Science and Higher Education within “Regional Initiative of Excellence” Program for 2019-2022 [grant no. 021/RID/2018/19].

Notes on contributors

Paweł Oleksy

Paweł Oleksy is an Assistant Professor at the Krakow University of Economics, Department of Financial Markets. He earned his Ph.D. in Economics from the SGH Warsaw School of Economics and was a former DAAD scholarship holder at the Albert-Ludwigs University in Freiburg. He is an author and reviewer of numerous research papers, participates in national and international research projects, and serves as a court expert in finance. His research interests encompass financial markets, alternative investments, and the role of financial institutions in shaping the economy at both the micro and macro levels.

Marcin Czupryna

Marcin Czupryna has been working at the Department of Financial Markets at the Kracow University of Economics since 2012. Marcin Czupryna is a graduate of the Warsaw School of Economics, majoring in Quantitative Methods and Information Systems. He completed doctoral studies and obtained a PhD degree in economics at the Collegium of Economic Analysis of the Warsaw School of Economics. In 2004 he stayed at CORE (Center for Operations Research and Econometrics) in Louvain-la-Neuve, Belgium.Scientific interests include the theory of decisions under risk and uncertainty, behavioral aspects of the decision-making process with application to financial markets, microstructural aspects of financial markets.

Andrzej Zyguła

Andrzej Zyguła is an Associate Professor at the Department of Corporate Finance, Cracow University of Economics in Poland. He is an author and co-author of numerous research papers, participates in research projects and is an expert on implementation work carried out to facilitate businesses. His research interests encompass financial markets, corporate mergers and acquisitions, the payout policy of enterprises, and the financialization of non-financial corporations.