Impact and mechanisms of digital finance on corporate bond credit spreads in China

Weijing Kang

Finance Research Letters, 2025, vol. 82, issue C

Abstract: The challenge of corporate bond financing and bond default has become a pressing concern and hotly debated topic in China. This study examines the impact of digital finance on corporate bond credit spread (CS) in China using 97,775 firm-year corporate bond observations from 2011 to 2020 obtained from the Wind database and employing a fixed effect model. Results indicate that digital finance significantly reduces corporate bond CS. The depth of financial usage has the greatest impact on CS, followed by coverage breadth and the overall level of digitalization. Digital finance alleviates financing constraints, lowering CS. The negative relationship between digital finance development and CS is more pronounced for firms with higher levels of accounting information opacity. Findings remain robust after addressing endogeneity issues and adopting alternative measures. Regulators are advised to adopt a sandbox regulatory mechanism to ensure the sustainable growth of digital finance.

Keywords: Digital finance; Corporate bond credit spreads; Accounting information opacity; Financing restrictions: China (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008244

DOI: 10.1016/j.frl.2025.107565

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