This paper uses the data of China’s A-share listed companies from 2011 to 2021 to study the impact of financial asset allocation on enterprise technological innovation. It is found that the relationship between financial asset allocation and enterprise technological innovation is inverted U-shaped that is with the improvement of financial asset allocation enterprise technological innovation first rises and then decreases. For enterprises with different property rights and scales and under different financing constraints there is heterogeneity between financial asset allocation and enterprise technological innovation. The conduction channel test shows that overallocation of financial assets will crowd out liquidity supply which in turn will have a negative impact on enterprise technological innovation. The degree of government subsidies has a significant regulating effect on the technological innovation process of financial asset allocation. The results show that real enterprises should not blindly invest in financial assets but should actively explore the existence of the optimal level of financial asset allocation to prevent the hidden dangers of excessive financialization.