Assessing the Effect of Digital Divide on Risky Financial Market Participation in China Via Household-Level Analysis

Zhen Fang, Peng-Ling Liu and Chien-Chiang Lee ()

Emerging Markets Finance and Trade, 2025, vol. 61, issue 15, 4826-4840

Abstract: Households in emerging market countries often face the issue of limited participation in risky financial markets. This research investigates how the digital divide (DD) affects household participation in risky financial market (RFM) by adopting a sample of China Household Finance Survey (CHFS) in 2017 and 2019. With the help of a factor analysis model, we calculate the DD and analyze the regression results of the Probit and Tobit models. We find that DD significantly reduces household participation in RFM. The results of the advantage analysis suggest that the impact of having no computer is the most important, followed by having no digital payment, while the smallest impact is associated with having no smartphone. The results of the mechanism analysis also suggest that financial availability, social networks, income growth and social trust negatively amplify the relationship between household participation in RFM and the DD. After comparing the impact in the households with different characteristics, we conclude that the DD effect in reducing household participation in RFM is more prominent for young-middle-age, lower-asset, rural and undeveloped households. The conclusions of this paper provide a new perspective for understanding the limited household participation in RFM.

Date: 2025
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DOI: 10.1080/1540496X.2025.2527765

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