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Total Factor Productivity (TFP) and Financial Markets

Min Bai et al.

American Business Review2025https://doi.org/10.37625/abr.28.1.176-202article
ABDC B
Weight
0.46

Abstract

The dynamic interplay between real firms and the financial markets remains under continuous government scrutiny, reflecting the evolving diversity that accompanies the expansion of financial markets. Given the financial market's critical role in capital provision, it is essential to understand how different funding relationships influence firm performance. This study focuses on A-share listed companies in China from 2013 to 2023, categorizing their funding relationships into two distinct types: net investment and net financing. The analysis reveals a significant dampening effect on Total Factor Productivity (TFP) associated with net investment-based funding relationships. Mechanistic investigations indicate that this suppression is due to the diversion of capital from core business activities towards net investment activities, ultimately hindering productivity. These findings offer valuable insights into the complex relationship between real firms and the financial markets, highlighting the varied mechanisms through which the financial markets can either enhance or impede firm value. Additionally, the study provides practical policy recommendations for regulatory authorities aimed at optimizing the real economy's access to financial services by refining the funding relationships between real firms and the financial markets.

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https://doi.org/https://doi.org/10.37625/abr.28.1.176-202

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@article{min2025,
  title        = {{Total Factor Productivity (TFP) and Financial Markets}},
  author       = {Min Bai et al.},
  journal      = {American Business Review},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.37625/abr.28.1.176-202},
}

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Evidence weight

0.46

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.37 × 0.4 = 0.15
M · momentum0.60 × 0.15 = 0.09
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.