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Does FinTech reduce corporate excess leverage? Evidence from China

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  • Lai, Xiaobing
  • Yue, Shujing
  • Guo, Chong
  • Zhang, Xinhe

Abstract

As a financial innovation driven by digital technology, FinTech has a significant impact on the traditional financial system and the real economy. Existing studies mainly focus on the application of FinTech in the fields of banking and capital markets, less attention is paid to the firm-level evidence, especially the discussion of enterprise capital structure. In fact, when a company’s capital structure has a high proportion of debt, it is considered overleveraged, which could produce devastating impacts on the sustainable development of firms and the entire capital market. This paper explores solutions to address corporate excess leverage from the perspective of FinTech. Using Chinese listed companies from 2007 to 2020 as a sample, we find that regional FinTech significantly reduces financing constraints and improves stock liquidity, which is beneficial for the alleviation of excess leverage The results hold after a battery of robustness tests. Moreover, the heterogeneity analysis shows that this impact is more pronounced for private enterprises and companies with a relatively low degree of capital market liberalization. This study aims to provide alternative solutions to avoid excess corporate leverage in China and other emerging economies.

Suggested Citation

  • Lai, Xiaobing & Yue, Shujing & Guo, Chong & Zhang, Xinhe, 2023. "Does FinTech reduce corporate excess leverage? Evidence from China," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 281-299.
    • Handle: RePEc:eee:ecanpo:v:77:y:2023:i:c:p:281-299
    DOI: 10.1016/j.eap.2022.11.017
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    More about this item

    Keywords

    FinTech; Excess leverage; Financing constraints; Stock liquidity;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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