Can fintech make corporate investments more efficient? A study on financing constraints and agency conflicts

Abstract

This study investigates the impact of fintech development on corporate investment efficiency from the dual perspectives of financial constraints and agency conflicts, based on data from Chinese A-share listed corporations and 293 cities’ fintech development levels from 2011 to 2020. The results of the study show that fintech makes corporate investments more efficient and that this beneficial impact is long-term; as fintech develops, it plays a greater role in increasing corporate investment efficiency. Based on heterogeneity research, the effect of fintech in boosting corporate investment efficiency is more pronounced in non-states, growth periods, and corporations with weaker internal and external governance. From both aspects of inefficient investment, fintech alleviates under-investment and inhibits over-investment, with a higher inhibitory effect on over-investment. Through a mechanism analysis, we found that fintech has a stronger mitigating effect on under-investment in corporations with higher financing constraints and a stronger inhibiting effect on over-investment in corporations with larger agency conflicts. The conclusions of this study provide critical information for promoting fintech adaptation to corporate needs and high-quality economic development.

Keywords:

• Fintech
• corporate investment efficiency
• financing constraints
• agency conflicts
• China

Subject classification codes:

• C10
• D22
• G21
• M20

Disclosure statement

The authors declare no conflict of interest.

Additional information

Funding

This paper is supported by the Fundamental Research Funds for the Central Universities of China (B210201055), and the Key Topics for “the 14th Five-Year Plan” of the Jiangshu Province Education Science (C-b/2021/01/41).