Abstract Taking non-financial declining firms from 2010 to 2021 as research samples, this study explores the formation mechanism and consequences of the path-dependent effect of financial asset allocation in declining firms. The findings are as follows: the higher the degree of an enterprise’s dependence on financial asset allocation in the past, the stronger the motivation of financial asset allocation in the face of recession, and the industry peer effect further intensifies this path dependence；limited to other conditions, financial asset allocation can’t better help recessionary enterprises achieve performance reversal, which further validates the “out of real to virtual” hypothesis and the negative view of change. Heterogeneity research finds that when declining firms allocate financial assets based on speculative motives rather than financing and recovery motives, the negative effect of financial asset allocation on performance reversal is stronger. In addition, by subdividing the types of financial assets, it is found that the short-term financial asset allocation can help declining firms achieve performance reversal, while the long-term financial asset allocation can’t help declining firms achieve performance reversal.
XU Peng,LI Tinggang. Research on the Formation Mechanism and Consequences of the Path-Dependent Effect of Financial Asset Allocation in Declining Firms[J]. Chinese Journal of Management, 2025, 22(6): 1032-.
