The trend that China's economy is being "off the real to the virtual" is a typical fact in recent years. A large number of firms invest and hold financial assets, the investing and profit-generating channels of the real sectors are becoming more and more financialized. By utilizing sample of Chinese A-share manufacturing firms from the year of2007 to 2015, and using fixed effect model, this paper investigates the driving factor of the financialization of real sectors. The results show that: (1) institutional investors, overall, drive the financialization of real sectors; (2) institutional investors are heterogeneous, that is, long-term institutional investors do not show a significant correlation with the financialization of real sectors; however, short-term institutional investors significantly drive the financialization of real sectors; (3) the results of further investigation show that the driving effect of institutional investors on
financialization is more significant in state-owned firms than that in private firms. The findings have implications as follows: guiding the investment behavior of institutional investors, leading financial sector to serve the real economy, promoting financial structure reform.
Keywords: institutional investors, "off the real to the virtual", real sectors, financialization
China Finance and Economic Review
Volume 8 Number 2 Summer 2019.P25