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The impact of digital finance on firm's inefficient investment: Evidence from Chinese A-share listed companies

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  • Peng, Nianjiao
  • Wen, Manhong
  • Tian, Xiujuan
  • Wu, Xiaxue

Abstract

Using data from China's A-share market, this study identifies that regional digital finance development significantly increases corporate investment inefficiency. This is because digital finance increases enterprises’ access to finance by reducing financing constraints. Digital finance development materially exacerbates corporate investment inefficiency by loosening financial regulations. The deterioration is not significant amid tightening financial regulations. While deterioration is significantly positive in non-state-owned enterprises (non-SOEs), it is not significant in state-owned enterprises (SOEs). The findings suggest that the government and firms must consider consequent investment risks amid digital finance development.

Suggested Citation

  • Peng, Nianjiao & Wen, Manhong & Tian, Xiujuan & Wu, Xiaxue, 2024. "The impact of digital finance on firm's inefficient investment: Evidence from Chinese A-share listed companies," Finance Research Letters, Elsevier, vol. 69(PA).
    • Handle: RePEc:eee:finlet:v:69:y:2024:i:pa:s1544612324011474
    DOI: 10.1016/j.frl.2024.106118
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    More about this item

    Keywords

    Digital finance; Investment inefficiency; Financing constraints;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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