The Nexus between Digital Finance and Economic Development: Evidence from China

Digital finance, financial regulation and transformation of R&D achievements

The transformation of scientific and technological achievements is the best form of the combination of technology and the economy, and only when new technologies are transformed into commodities can they be transformed into real productive forces and exert scale effects. With the rapid development of digital finance, it has changed the operating mode of financial markets and consumer behavior. Does digital finance promote the transformation of R&D achievements? We empirically examine this question using the panel data covering 30 provinces in China from 2011 to 2021. The empirical results indicate that the development of digital finance can improve the transformation rate of R&D achievements. Additionally, we find that the role of digital finance in promoting the transformation of R&D achievements needs to be guaranteed by the level of effective financial regulation. The research conclusions are a relevant reference for the government to improve the transformation rate of scientific and technological achievements.

Digital inclusive finance, R&D investment, and green technology innovation nexus

Green technology innovation is an effective means to achieve high-quality economic development. The impact and mechanism of digital financial inclusion on regional green technology innovation are tested using a threshold regression model and the panel fixed effect model, based on China's provincial Panel data (provincial Panel data are regional annual report data) from 2011 to 2020. According to the study, there is a direct link between local green technology innovation and digital financial inclusion. This paper highlights the differences in their influence by location and usage depth and underscores the necessity of government engagement to improve these characteristics. Information infrastructure needs to be strengthened, especially in areas with gaps. Greater investment in research and development (R&D) indirectly supports regional green technology innovation since it is impacted by digital financial inclusion. Interestingly, a threshold effect becomes most noticeable when digital financial inclusion rises above a particular threshold. Promoting utilizing digital financial inclusion to lessen regional differences in green technology innovation is important.

Digital finance and M&As: An empirical study and mechanism analysis

With the rapid growth and wide application of digital technology, enterprises have entered the digital era with both opportunities and challenges existing. Mergers and acquisitions are one of the most efficient ways to integrate resources and achieve profit growth, giving enterprises advantages in competing in the new mode of economic growth. Based on this, this research tries to explore whether the development of digital finance will contribute to the emergence of M&As activities through combining M&As data of the Chinese stock market with the digital finance inclusion index between 2012 and 2020. The results show that the development of digital finance largely influences M&As activities through lower acquirers' financial constraints. We further replace digital finance with three sub-indexes including coverage breadth, usage depth, and digitalization level to explore the impact of different dimensions of digital finance on M&As. Results show that coverage breadth plays a more important role. In addition, heterogeneity tests reveal that the relationship between the development of digital finance and M&As activities varies significantly. The influences of digital finance on private and western and central enterprises are more significant compared with state-owned and eastern enterprises. According to the study, since the development of digital finance can be an efficient way to ease financial constraints and boost M&As activities, the government should promote the development of digital finance while companies strive to make the most use of it.

The impact of digital finance on SMEs financialization: Evidence from thirty million Chinese enterprise registrations

Based on the registration information of 30 million Chinese enterprises, this study innovatively constructs a financialization index based on the text information of enterprise business scope. Then, the impact of digital finance on small and medium-sized enterprise (SME) financialization is examined. Specifically, this study screens out SMEs involved in financial transactions by counting the keyword information in their business scope. The level of SME financialization is measured at the provincial level, based on a large number of registration samples. Empirical results based on panel fixed effects show that digital finance significantly inhibits SME financialization. On average, for each standard deviation increase in digital finance, SME financialization decreases by 0.087 standard deviations. This conclusion remains valid after a series of robustness analyses. A mechanism analysis shows that digital finance inhibits SME financialization by alleviating financing constraints, especially by providing liquidity to SMEs with relatively high financing constraints. In addition, the risk consequences of SME financialization are further examined, and SME financialization is found to significantly increase bankruptcy risk, while digital finance alleviates financing constraints and thus reduces bankruptcy risk. This study provides a new perspective for the governance of SME financialization and the optimization of the survival environment for SMEs in the context of the digital economy.

Quantifying an influence of green credit on digital technology innovation: financial perspective of a China's case study

This paper examines the impact of green credit (GC) on digital technology innovation based on Chinese enterprises using panel data from 1990 to 2016. The study collected panel data from the 40 Chinese firms listed on the Beijing and Wuhan stock markets. Manufacturing companies were selected because they mainly contribute to green credit from pre- and post-policy periods. First, in the "two high and one surplus" sectors, the application of China's Green Credit 2012 could significantly increase total factor digital technology innovation by 1.21%. Results show a considerable drop in the variable values of digital technology innovation, 61.3%; green credit policy, 10.45%; leverage, 21.0%; and green innovation, 85.4%. The results of the absolute value of standard error after matching is much lower than 20.0%, demonstrating that the variable features of the two sets of samples are similar. In conclusion, GC's impact on the FDI of capital was asymmetrical, reflecting various impacts on businesses with various types of property rights and sizes.

Does the development of digital finance curb carbon emissions? Evidence from county data in China

Reducing carbon emissions is the key to fulfilling the "double carbon commitment" and promoting the green transformation of the economy. The financial sector is the forerunner of change in economic development. The rapid development of digital finance has disrupted the traditional financial operation mode and has had a significant impact on economic development and environmental quality. This paper explores the impact of digital finance development on carbon emissions using carbon emission data from 2011 to 2017 in China's counties and combining it with the Digital Inclusive Finance Index of Peking University. The findings are as follows: (1) The development of digital finance can curb carbon emissions, and this causal relationship still holds through a series of robustness tests. The greater the carbon emissions, the better the carbon suppression effect of the development of digital finance. (2) When regions face strict financial regulation and environmental constraints, the development of digital finance can be more effective in reducing carbon emissions. The existence of a digital divide in general can weaken the disincentive effect of the development of digital finance on carbon emissions. (3) The development of digital finance can promote the development of green finance, enhance the level of green technological innovation, improve green total factor productivity, and transform energy structures, thus curbing carbon emissions. This paper not only enriches the literature on the development of digital finance and the environment but also provides a reference for government departments to improve the development strategy of digital finance and achieve "carbon peaking and carbon neutrality."

The nexus between digital finance and carbon emissions: Evidence from China

Finance is significant support for the low-carbon transformation of the real economy, in which digital finance as a new direction of financial development exerts a significant influence on carbon emissions. Therefore, it is crucial to investigate the association between digital finance and carbon emissions in order to develop carbon reduction strategies from the financial side. For this purpose, using the sample set covering 30 provincial areas during 2011–2020, this paper investigates the direct, indirect, and non-linear effects of digital finance on carbon emissions by applying fixed effects, mediating effects, and threshold effects analysis techniques. The results indicate that: (1) digital finance can significantly mitigate carbon emissions at the national level. (2) Digital finance inhibits carbon emissions as it drives green technological innovation and industrial structure upgrading. (3) Significant regional heterogeneity is observed in the effect of digital finance on carbon emissions, i.e., the effects of digital finance on carbon emissions are higher in the east-central region than in the overall sample, while the opposite is true in the western region. (4) The dampening effect on carbon emissions steadily increases as digital finance levels cross the first and second thresholds, respectively. Based on the above considerations, policymakers shall not only develop differentiated digital finance initiatives, but shall also fully unleash carbon emission reduction potential by rationalizing and optimizing industrial layout and strengthening financial subsidies for green technology innovation.

Does digital finance improve the green investment of Chinese listed heavily polluting companies? The perspective of corporate financialization

While now appears appropriate to assert that digital finance can relieve firms' financing constraints, the picture of whether it can improve enterprises' green investment is much less clear. Using 2011-2019 data for Chinese listed heavily polluting (HP) enterprises, we examine the effects of digital finance on corporate green investment. Results show that digital finance impedes HP firms' green investments, and this finding is robust to various tests, including the instrumental variable approach, exogenous shock, and alternative measures of variables. Additional tests reveal that digital finance increases firms' financial investment, which crowds out green investment. Also, this inhibitory impact varies with firms' geographical location, industry characteristics, and the implementation of the new Environmental Protection Law. The findings of this study provide new perspectives on digital finance by identifying its negative impact on the corporate green environment. We also propose corresponding policy recommendations, including strengthening the regulation and guidance of digital finance development, reducing monopolies in the financial sector, and formulating differentiated environmental policies.

Can Digital Economy Promote Energy Conservation and Emission Reduction in Heavily Polluting Enterprises? Empirical Evidence from China

This paper examines the impact of digital economy on corporate energy conservation and emission reduction (CECER) using China's A-share listed heavily polluting enterprises from 2012 to 2019 as a sample. Our results show that: (1) Digital economy can significantly increase CECER, and this effect is significant for mining and manufacturing enterprises, and less significant for power, heat production and supply enterprises; (2) Mechanism research shows that digital economy promotes CECER through enhancing the green technology innovation capability, easing the financing constraints, and boosting market competition; (3) Heterogeneity research indicates that the promotion of digital economy to CECER is more significant in economically developed regions and regions with less financial pressure from local governments. This paper clarifies the factors influencing CECER and provides empirical evidence for achieving digital economy development and government goals for CECER.

Can Digital Finance Narrow the Household Consumption Gap of Residents on Either Side of the Hu Line?

The Hu line is a geo-demographic demarcation line in China. The eastern side of the line supports more than 96% of the population, despite constituting less than 44% of the national territory. The domestic household consumption level gradually exhibited an asymmetrical spatial pattern, with the Hu line serving as a demarcation line spanning from the north to the south. Continuous advancements in network and digital development domestically have allowed for an integration of digital technology with traditional financial services, thereby creating digital finance. Based on this, can digital finance narrow the household consumption gap among residents on both sides of the Hu line? By applying a geographical detector that could empirically detect the spatial causality, this paper aimed to explore whether digital finance can narrow the gap between the consumption levels of residents on both sides of the Hu line. The study results indicated that digital finance was a key factor influencing domestic household consumption. Combining digital finance with other factors such as marketization degree, the urban–rural income gap, and the urbanization level, our understanding of how it affects household consumption was further enhanced. Digital finance and household consumption levels had the same spatial structure, with the Hu line serving as their spatial axis. Additionally, the southeast side of the Hu line had significantly higher consumption levels than the northwest side. Digital finance in provinces on the southeast side of the line improved household consumption and simultaneously shared the positive benefits with neighboring provinces. In contrast, digital finance in provinces on the northwest side of the line decreased household consumption and shared this negative impact with neighboring provinces. We believe this study has provided a new perspective for academia to explore the relationship between the development of digital finance and residents’ consumption levels.

The Nexus between Digital Finance and High-Quality Development of SMEs: Evidence from China

In the context of digital finance and based on the characteristics of the high-quality development of SMEs in China, this paper investigates the influence of digital finance on the high-quality development of SMEs and explores their mechanism of influence. A panel econometric model and mediation model are used to evaluate the data of 581 SMEs in China from 2011 to 2020. The results show that digital finance has a significant role in promoting the development quality of SMEs. Heterogeneity analysis shows that the promotion effect of digital finance is more obvious in central and western regions, non-heavy pollution industries and non-state-owned SMEs than that of other SMEs. Further analysis shows that digital finance improves the efficiency of financial resource allocation, which in turn promotes the high-quality development of SMEs. After applying a test of robustness, the results proved significant.

Can digital finance reduce industrial pollution? New evidence from 260 cities in China

Industrial pollution reduction is a crucial issue in the pursuit of sustainable economic and environmental development. As a product of the deep integration of traditional finance and Internet information technology, digital finance has become an effective tool for regulating the use of funds and strengthening the effectiveness of policies in the context of the digital era, which has obvious effects on industrial pollution emissions. Using panel data of 260 prefecture-level cities in China from 2011-2019 and the digital inclusive finance index jointly compiled by Peking University and Ant Financial Services Group, this paper empirically analyzes the impact of digital finance on industrial pollution emissions through fixed effects model, mediating effects model and threshold effects model. The empirical results show that digital finance can effectively reduce industrial pollution and part of the impact is achieved through industrial structure. In the process of reducing industrial pollution by digital finance, there exists double threshold effects. When the development of digital finance breaks the threshold value, the industrial pollution emission reduction effect appears to accelerate. Finally, this paper puts forward targeted suggestions to promote industrial pollution reduction and environmental economic development.

Digital Inclusive Finance, Environmental Regulation, and Regional Economic Growth: An Empirical Study Based on Spatial Spillover Effect and Panel Threshold Effect

The development of digital financial inclusion has added a new vitality to economic growth, and environmental regulation is an important tool to achieve sustainable economic growth. Therefore, whether there is a synergistic effect between these two factors of economic growth is a topic worth exploring. This paper uses the space econometric model and threshold model to explore the impact of digital financial inclusion and environmental regulation on regional economic growth using panel data from 30 Chinese provinces, collected between 2011 and 2019. The research results prove that the development of digital financial inclusion and the improvement in the intensity of environmental regulation have a significant direct promotion effect and negative spatial spillover effect on regional economic growth. Moreover, the two have a significant synergistic effect on regional economic growth. A panel threshold analysis showed that, with the improvement in the level of digital financial inclusion, the regression coefficient of environmental regulation changed from negative to positive, which played a significant role in promoting regional economic growth. The heterogeneity analysis found that digital inclusive finance in eastern regions of China plays a greater role in promoting the economy, whereas environmental regulation in the central region plays a greater role in promoting the economy. The synergy between the two in the central region greatly promotes economic development. When digital inclusive finance is used as the threshold variable, environmental regulation in eastern and western regions has a single-threshold effect on regional economic development. Based upon these research results, this paper proposes that a coordination mechanism between digital financial inclusion and environmental regulation should be established to give full play to their synergies in sustainable economic growth.

Poverty reduction in rural China: Does the digital finance matter?

As digital finance is widely spread and applied in China, this new format of financial technology could become a new way to reduce poverty in rural areas. By matching digital financial indexes of the prefectural-level cities with microdata on rural households from the China Household Finance Survey (CHFS) in 2017, we find that digital finance significantly suppresses absolute poverty and relative poverty among rural households in China, which is supported by a series of robustness tests, such as the instrumental variable approach, using alternative specifications, and excluding extreme observations. Additionally, we provide evidence that the poverty reduction effect of digital finance is likely to be explained by alleviating credit constraints and information constraints, broadening social networks, and promoting entrepreneurship. Our findings further complement the research field on financial poverty reduction and offer insights for the development of public financial policies of poverty reduction in other countries, especially in some developing countries.