Does digital finance impact debt concentration of Chinese firms?

ABSTRACT

We investigate the relation between digital finance and debt concentration in capital structures of firms. Measuring digital finance with a comprehensive index, we show that digital finance is indeed related to more concentrated debt structures of firms. Turning to the sub-indices of digital finance, coverage breadth and usage depth of digital finance increase firms’ debt concentration, while digitization degree is not a central concern for firms. The link between digital finance and debt concentration is stronger for companies with high level of information asymmetry and high default risk.

KEYWORDS:

• Digital finance
• debt concentration
• debt types
• negotiation

JEL CLASSIFICATION:

• D21
• M41
• G32

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This work was supported by Education Department of Hubei Province [21Q133].