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Does Fintech affect shadow banking of non-financial firms? Evidence from the entrusted loans

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  • Feng, Yongqi
  • Cao, Yue
  • Ni, Juan

Abstract

Fintech is revolutionizing the financial sector, but its impact on shadow banking activities remains uncertain. Based on evidence from China's entrusted loans between 2011 and 2021, this study investigates how Fintech development affects entrusted loans of non-financial firms using constructed Fintech indicators. We find a strong and robust negative relationship between Fintech and entrusted loans of non-financial firms, and the results still hold after a series of robustness tests and endogeneity discussions. Fintech may reduce entrusted loans of non-financial firms by optimizing credit allocation and weakening incentives for investment substitution. Moreover, the impact of Fintech on entrusted loans is heterogeneous, depending on the geographic location of the lender, the ownership of the lender, and the collateral of the borrower. Specifically, lenders located in the eastern region, lenders with government ownership, and borrowers without collateral are more affected. Taken together, these findings extend existing research on the impact of Fintech on the broader economy.

Suggested Citation

  • Feng, Yongqi & Cao, Yue & Ni, Juan, 2024. "Does Fintech affect shadow banking of non-financial firms? Evidence from the entrusted loans," International Review of Financial Analysis, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:finana:v:94:y:2024:i:c:s105752192400200x
    DOI: 10.1016/j.irfa.2024.103268
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    More about this item

    Keywords

    Fintech; Shadow banking; Entrusted loan; Credit allocation; High-quality development of real enterprise;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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