When does finance lead to investment?

Globally, over the last decades both financing (e.g. bonds and loans) and financial assets have grown faster than value-added in the economy. Much finance did not contribute to production. This poses a question in connection to macroeconomic theory, where finance intermediates savings into productive investments. It also questions the assumption that finance will help grow a greener, more resilient and autonomous European economy. 

Alternatively finance can be understood as primarily supporting asset values. If delinked from economic activity, this distorts resource allocation and - since every financial asset is a liability – the fees, dividends, interest and repayment drain incomes from the real sector, hindering investment and consumption.

Research into this ‘assetization’ process could explore candidate explanations, including change in industrial structure, the rise of intangible assets in corporate balance sheets, financialized business governance, and the dynamics of valuations gains in financial and real estate markets.

https://www.rug.nl/staff/d.j.bezemer/bezemer-macrofinancial-slippage-4-august.pdf