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Digital finance development, financial mismatches, and corporate shadow banking activities

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  • Yang, Rui
  • Li, Rongrong
  • Ge, Xinyu

Abstract

The existing research suggests that a rapid growth of corporate shadow banking (CSB) activities in China is linked to financial repression. However, it is unclear whether digital finance development (DFD) featured with financial inclusion helps contain the growth. By using a sample of Chinese A-share listed non-financial enterprises (NFEs) from 2011 to 2021, we examine the effect of DFD on CSB activities. We offer empirical evidence that DFD can help decrease such activities. Our findings remain robust even after tackling endogeneity issues and undertaking a set of robustness checks. Furthermore, we identify financial mismatches, such as financial resource mismatch and maturity mismatch, as key pathways by which DFD influences CSB activities. Our results highlight the significant role of DFD in enhancing resource allocation and, crucially, in fostering a more transparent and stable financial system.

Suggested Citation

  • Yang, Rui & Li, Rongrong & Ge, Xinyu, 2025. "Digital finance development, financial mismatches, and corporate shadow banking activities," China Economic Review, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:chieco:v:93:y:2025:i:c:s1043951x25001531
    DOI: 10.1016/j.chieco.2025.102495
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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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