The power of patience: How does patient capital affect corporate financialization?

Against the backdrop of global advocacy for sustainable development, patient capital—a form of capital that pursues long-term value and shares risks with firms—has garnered widespread attention. However, whether it genuinely benefits firms remains to be tested. This study, using a sample of Chinese non-financial listed firm from 2007 to 2024, finds that patient capital significantly inhibits corporate financialization. After a series of robustness tests, we arrive at consistent conclusions. Further evidence reveals differing mechanisms through which two types of patient capital influence corporate financialization: long-term debt maturity acts by easing financing constraints, while long-term institutional ownership reduces agency problems. Cross-sectional analysis indicates that patient capital exerts greater influence when firm face fiercer market competition and exhibit higher levels of corporate opacity. Finally, we find that patient capital significantly promotes corporate sustainability by inhibiting corporate financialization. This paper provides crucial empirical evidence for expanding patient capital and preventing the economy’s shift from the real to the virtual sector.