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Does FinTech Constrain Corporate Misbehavior? Evidence from Research and Development Manipulation

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  • Yuqiang Cao
  • Zhiwu Chen
  • Meiting Lu
  • Zihui Xu
  • Yizhou Zhang

Abstract

Industrial policy plays a significant role in driving firm innovation. However, prior research presents evidence that firms may strategically cater to the policy in the process of implementation to gain favorable policy outcomes. This study examines how the development of FinTech affects firms’ research and development (R&D) manipulation behavior and innovation performance. Using a sample of Chinese listed firms from 2008 to 2020, we find a negative relationship between local FinTech development and manipulation in firms’ R&D. We also find the mitigating impact of FinTech is attributed to its dual role of reducing information asymmetry and easing financing constraints and is more pronounced for firms located in regions with higher marketization, non-state and politically connected enterprises, and small and medium-sized enterprises. Additional tests suggest that FinTech significantly improves the quality and efficiency of firm innovation, which ultimately enhances corporate value. Overall, our findings provide new insights supporting the development of FinTech.

Suggested Citation

  • Yuqiang Cao & Zhiwu Chen & Meiting Lu & Zihui Xu & Yizhou Zhang, 2023. "Does FinTech Constrain Corporate Misbehavior? Evidence from Research and Development Manipulation," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(10), pages 3129-3151, August.
    • Handle: RePEc:mes:emfitr:v:59:y:2023:i:10:p:3129-3151
    DOI: 10.1080/1540496X.2023.2206518
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