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How does bank digitalization benefit firm borrowing? Evidence from China

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  • Wu, Xinhong
  • Wu, Xinmei

Abstract

This paper studies whether and how bank digitalization affects firm borrowing. While prior work emphasized the promising impact of digital finance on broadening financial accesses, the role of bank-specific digitalization from the perspective of borrowers remains underexplored. Based on the dataset of Chinese non-financial listed firms from 2010 to 2020, our results show that higher bank digitalization leads to reduced firm borrowing costs (−3.77 %), increased long-term loan ratios (+7.20 %), and lower collateralized loan ratios (−2.24 %). These effects are driven by two key mechanisms of enhanced risk control and cost-saving. Additionally, the positive role of bank digitalization in benefiting firm borrowing would be more pronounced for firms with smaller scale, non-state ownership, and higher productivity. Overall, our findings enrich the understandings on financial inclusion agenda and provide policy insights for improving bank digitalization.

Suggested Citation

  • Wu, Xinhong & Wu, Xinmei, 2025. "How does bank digitalization benefit firm borrowing? Evidence from China," Economic Modelling, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:ecmode:v:153:y:2025:i:c:s0264999325003086
    DOI: 10.1016/j.econmod.2025.107313
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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