Digital Inclusive Finance and Firm Entry: Dual Mechanism of Alleviating Informational and Financing Constraints

Zhihua Leng, Jing Li, Yuanyuan Xiu and Siqin Liu

SAGE Open, 2025, vol. 15, issue 3, 21582440251368966

Abstract: This study investigates how digital inclusive finance facilitates firm entry by alleviating informational and financial constraints. We first develop a theoretical model of entrepreneurial decision-making that incorporates both informational and financing constraints. Using panel data for 285 Chinese prefecture-level cities from 2011 to 2019, we estimate city- and year-fixed-effects models and implement two-stage least-squares, treating the interaction between each city’s distance to Hangzhou and the national number of mobile phone users as an instrumental variable for digital inclusive finance to mitigate endogeneity. The empirical results demonstrate that digital inclusive finance significantly promotes firm entry through a dual mechanism: reducing both informational barriers and financing constraints. The effects are particularly pronounced for micro, small, and private enterprises, as well as in the tertiary sector and productive service industries. Our findings suggest policymakers should strengthen digital finance in underdeveloped regions and provide targeted support to resource-constrained entrepreneurs, fostering economic vitality and sustainable development. JEL Classification: G21, L26, O33.

Keywords: digital inclusive finance; firm entry; informational constraint; financing constraint (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/21582440251368966 (text/html)

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:sae:sagope:v:15:y:2025:i:3:p:21582440251368966

DOI: 10.1177/21582440251368966

Access Statistics for this article

More articles in SAGE Open
Bibliographic data for series maintained by SAGE Publications ().