Fintech Pilot Programs and Digital Innovation: Evidence from Quasi-Natural Experiments in China

Xiaolin Yu and Jin Seo Cho ()
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Xiaolin Yu: Yonsei University

No 2025rwp-257, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: The current study examines whether government-led digital finance initiatives promote firm-level digital innovation by leveraging the staggered rollout of China’s Fintech pilot programs as quasi-natural experiments. Our dataset comprises 26,746 firm-year observations of A-share listed companies from 2009 to 2023. To measure innovation, we develop a text-based indicator derived from the frequency of digital-related keywords in the annual reports of the listed firms. Employing a multi-period difference-in-differences design, we find that designation as a pilot zone increases digital innovation intensity by 0.8225 per thousand report words. These results remain robust across parallel, propensity score matching, placebo, and robustness tests. Mediation analysis reveals that the part of the effect is attributable to increased R&D intensity, with the program raising the average R&D-to-sales ratio by 0.24 percentage points. Moreover, program effect is stronger among high-tech firms and those located in Central and Western China, regions characterized by relatively weaker financial and digital infrastructure.

Keywords: Difference-in-differences; Fintech pilot programs; digital innovation; R&D investments; firm heterogeneity (search for similar items in EconPapers)
JEL-codes: G18 G28 G38 O31 O32 O38 O53 P42 (search for similar items in EconPapers)
Pages: 35pages
Date: 2025-07
New Economics Papers: this item is included in nep-cna, nep-fdg, nep-pay, nep-sbm and nep-tid
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