Traditional finance, digital finance, and financial efficiency: An empirical analysis based on 19 urban agglomerations in China

Yunsong Wang, Aiqing Jiang, Songlin Zhang and Weihong Chen

International Review of Financial Analysis, 2024, vol. 96, issue PA

Abstract: With the emergence of the digital economy era, enhancing financial efficiency through the complementary effect of digital and traditional finance has increasingly become a focal point in the financial industry. This paper focuses on 19 urban agglomerations in China to investigate whether digital finance and traditional finance have complementary effect on improving financial efficiency. It explores the mechanisms behind this complementary effect, examines whether financial efficiency can continue to improve once digital finance reaches a critical scale, and investigates whether economic development moderates the impact of digital finance on financial efficiency. The findings reveal that digital finance contributes positively to enhancing financial efficiency, and that there exists a complementary effect between digital finance and traditional finance in this regard. These conclusions remain robust even after conducting various stability tests and addressing endogeneity issues. Mechanism testing demonstrated that this complementary effect arises from improvements of transactional efficiency and marketization level. Further analysis reveals that, while digital finance significantly enhances financial efficiency up to a critical scale, this effect diminishes beyond that threshold. Moreover, in areas with high-level financial development, economic development has a positive moderating effect on the impact of digital finance on financial efficiency, whereas in areas with low-level financial development, such a moderating effect is not robust.

Keywords: Traditional finance; Digital finance; Financial efficiency; Digital economy; Complementary effect (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521924005350
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:96:y:2024:i:pa:s1057521924005350

DOI: 10.1016/j.irfa.2024.103603

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().