Can Digital Inclusive Finance Help Small- and Medium-Sized Enterprises Deleverage in China?

Debao Dai, Mingzhu Fu (), Liang Ye and Wei Shao
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Debao Dai: School of Management, Shanghai University, Shanghai 200444, China
Mingzhu Fu: School of Management, Shanghai University, Shanghai 200444, China
Liang Ye: Office of Admissions and Career Services, Shanghai University, Shanghai 200444, China
Wei Shao: Scientific Research Management Department, Shanghai University, Shanghai 200444, China

Sustainability, 2023, vol. 15, issue 8, 1-19

Abstract: Digital technology has energized the development of inclusive finance in China and is beneficial in lowering the threshold and transaction costs of financial services and expanding financial coverage. However, it is a key issue whether digital inclusive finance can help SMEs overcome financing difficulties, obtain liquidity, reduce corporate leverage, and thus achieve sustainable development. By using the data from China’s small- and medium-sized listed companies and an aggregate development index of digital inclusive finance at the county level in China from 2015–2019, this empirical analysis finds that the development of digital inclusive finance can significantly reduce the leverage ratio of SMEs; specifically, the development of digital inclusive finance can cut down the leverage ratio of enterprises through easing financing constraints and reducing finance costs. Heterogeneity analysis shows that digital inclusive finance is more effective in reducing leverage for those low- and medium-leverage and non-private enterprises. Accordingly, it is suggested that the government continue to promote the development of digital inclusive finance, deepen the financial supply-side structural reform, and improve the efficiency of financial recycling. SMEs should speed up digital transformation to enable digital finance to provide precise financing services and achieve high-quality sustainable development. Digital financial institutions should improve the digital inclusive financial system as soon as possible, realize scientific supervision and risk prevention, and promote the sustainable development of digital finance.

Keywords: digital finance; SMEs; leverage; intermediation effect; finance costs (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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