Digital financial supervision and inefficient investment of enterprises: Evidence from China's internet financial industry

Jiandong Zheng and Feng Guo

Pacific-Basin Finance Journal, 2024, vol. 83, issue C

Abstract: This article examines the impact of China's digital financial supervision policy, specifically the Chinese Plan to Implement Special Rectification Work on Internet Finance Risks, on companies involved with the fintech business. This study constructs an internet finance dictionary from annual reports to identify companies involved in the internet finance business. We examine the impact of the policy on inefficient corporate investments using a difference-in-differences approach. We find that the policy reduces the inefficient investments by companies involved in the internet finance business from 2013 to 2019 and addresses in particular the problem of underinvestments. Mechanism analysis reveals that the policy primarily alleviates the principal–agent problem, reducing the “crowding-out effect” of the internet finance business on other investments and reducing inefficient investments. The additional dynamic analysis results demonstrate that the policy's effectiveness gradually strengthens after policy implementation, thereby continuously exerting a positive impact on corporate operations.

Keywords: Fintech; Digital finance; Financial regulation; Internet finance; Investment efficiency (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X24000064
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:pacfin:v:83:y:2024:i:c:s0927538x24000064

DOI: 10.1016/j.pacfin.2024.102255

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().