Evolution of the financial system and corporate growth

Author: Wang Fengrong
Publisher:
Publish Date: 2002-11-01
Features: This book conducts theoretical and empirical analysis of the micro-mechanism of economic growth—business growth—from the perspective of financial system changes, exploring the role and mechanism of financial system arrangements in business growth, as well as the symbiotic relationship between business growth and financial system changes in the long run. The core argument of this book is that the financial essence of business growth lies in the contradictory movement between the maximization of real value and the maximization of virtual value, which are both unified and opposed. Chapter provides a comprehensive overview of the theory of business growth. This chapter begins by reviewing existing theories of business growth, then, based on a rough outline of the historical growth of enterprises and the evolutionary path of financial systems, reveals the theoretical origins of the dualization of enterprise value—real value and virtual value. It further proposes the hypothesis of the dualization of business objectives as a fundamental proposition. This chapter serves as the theoretical foundation and background for the subsequent chapters.
Chapter 2 discusses the financial system conditions for business growth at the macro level, or the impact of financial system changes on business growth. Following the logic of "top-down and bottom-up" narration, this chapter first provides a historical description of the evolutionary path of financial systems, then moves on to the derivation and analysis of the financial mechanism. The examination of financial system changes in this chapter is conducted along two dimensions.
Chapter 3 reveals the endogenous role mechanism of financial systems in economic growth from the micro level, specifically explaining the relationship between business finance and enterprise value from the perspective of financing. Business operations are manifested as the process of signing and implementing financing contracts between business operators and investors, and the collection of financing contracts constitutes the financing structure. This chapter theoretically clarifies the "duality" proposition of financing contracts and financing structures, namely, the dual attributes of fund and regulation.
Chapter 4 continues to examine the financial process of business growth at the micro level—specifically the investment stage, or the issues of growth paths and growth performance. From the perspective of the real economy, business growth, as a process of pursuing value maximization, requires financing to provide necessary financial resources. The specific realization of business growth lies in the optimal allocation of financial resources and other resources into projects with positive net present value, thereby generating positive profits.
Chapter 5 transitions from the positive impact and efficiency (economic growth) effect proposition of the interaction between virtual capital and real capital, revealing the financial alienation and financial bubbles caused by the excessive expansion of the virtual economy, as well as their safety effects. This shift in perspective is determined by the inherent contradictions and evolutionary paths of the virtual economy and the real economy.
Chapter 6 explores the financial drivers leading to differences in business growth and economic growth, starting from the proposition of efficient business growth. In this chapter, we attempt to argue and summarize a core argument of this book: financial system innovation based on the needs of social and economic development will promote efficient growth and effectively increase national wealth and competitiveness.
Chapter 7 discusses the transformation of China's financial system changes and business growth. The logic and historical laws of financial system changes, as well as the gradual path of China's economic reforms, determine the "market-oriented" orientation of the development and evolution of China's financial system during the transformation period.