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Has FinTech changed the sensitivity of corporate investment to interest rates?—Evidence from China

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  • Lu, Yao
  • Zhan, Shuwei
  • Zhan, Minghua

Abstract

Taking into account the differences in the capabilities of FinTech to process standardized and non-standardized information within the credit market, this study introduces a novel perspective: FinTech has dual opposing effects on the interest rate sensitivity of corporate investment. Utilizing data from 2010Q1 to 2020Q4 of China, we empirically test this new viewpoint using the system-GMM and dynamic panel quantile regression methods. The results indicate that, overall, FinTech enhances banks' abilities to process standardized information but does not significantly weaken their capacity to handle non-standardized information. Consequently, banking FinTech amplifies the impact of interest rates on investment. However, further heterogeneity analysis reveals that FinTech does not have a significant impact on the interest rate sensitivity of investment for state-owned enterprises. Contrary to the prevalent belief that FinTech has inclusive benefits, its positive effects on small and medium-sized enterprises (SMEs) are noticeably diminished in regions with lower degrees of marketization, where non-standardized information dominates the credit market. The study's policy implications indicate that the impact of FinTech on alleviating SMEs financing constraints in developing countries may be overstated. Effective FinTech implementation necessitates synergies with market-oriented reforms. Government focus should pivot towards market-driven institutional changes, as relying solely on technological advancements for a 'leapfrog' strategy is likely to prove challenging.

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  • Lu, Yao & Zhan, Shuwei & Zhan, Minghua, 2024. "Has FinTech changed the sensitivity of corporate investment to interest rates?—Evidence from China," Research in International Business and Finance, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:riibaf:v:68:y:2024:i:c:s0275531923002945
    DOI: 10.1016/j.ribaf.2023.102168
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    More about this item

    Keywords

    Banking FinTech; Corporate investment; Loan interest rate; Sensitivity;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • G1 - Financial Economics - - General Financial Markets

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