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Fintech and corporate leverage manipulation: A new explanation from the perspective of capital demands

Author

Listed:
  • Zhu, Ruoyu
  • Tan, Kehu
  • Xin, Xiaohui
  • Wang, Qipo

Abstract

Leverage manipulation refers to fraudulent behavior in which a firm deliberately lowers its book leverage through various accounting techniques to achieve a variety of objectives. However, in the era of rapid growth of fintech, can it curb this fraudulent behavior? To answer this question, we investigate the impact of fintech on corporate leverage manipulation from the perspective of capital demands. We find that fintech can inhibit corporate leverage manipulation. Mechanism analysis demonstrates that fintech weakens firms’ incentives to manipulate leverage by lowering firms’ unreasonable excessive capital demands arising from inefficient investments and the satisfaction of management’s desires. Furthermore, the inhibiting effect of fintech on corporate leverage manipulation is more pronounced in firms with high financing constraints and in tech-industries. We shed light on the latent mechanism between fintech and corporate leverage manipulation.

Suggested Citation

  • Zhu, Ruoyu & Tan, Kehu & Xin, Xiaohui & Wang, Qipo, 2025. "Fintech and corporate leverage manipulation: A new explanation from the perspective of capital demands," Journal of Behavioral and Experimental Finance, Elsevier, vol. 46(C).
    • Handle: RePEc:eee:beexfi:v:46:y:2025:i:c:s221463502500036x
    DOI: 10.1016/j.jbef.2025.101055
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    References listed on IDEAS

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    1. Li, Wenyi & Li, Tang & Shi, Wenhao & Long, Yuqing & Liu, Wenyu, 2025. "A protective shield for banks: How fintech curbs earnings manipulation through information transparency and financing constraints," International Review of Financial Analysis, Elsevier, vol. 107(C).

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