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Digital finance, investor sentiment, and corporate inefficient investment

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  • Wang, Yihui
  • Ge, Xiangyu

Abstract

This paper systematically investigates the impact mechanism and heterogeneous characteristics of digital finance development on corporate investment efficiency using data from Chinese Shanghai and Shenzhen A-share listed enterprises from 2012 to 2023. The study reveals that digital finance significantly mitigates corporate inefficient investment behaviors by establishing big data risk control systems and intelligent information platforms, effectively alleviating information asymmetry between enterprises and investors. By lowering financial service thresholds and expanding financing channels, digital finance curbs both overinvestment and underinvestment, with its coverage breadth, usage depth, and digitization degree all exhibiting significant positive effects on investment efficiency. Furthermore, investor sentiment plays a significant positive moderating role in the influence of digital finance on investment efficiency, particularly amplifying its technological empowerment effect in optimistic market environments. Heterogeneity analysis shows that digital finance has a more pronounced efficiency-enhancing effect on state-owned enterprises and non-innovative enterprises.

Suggested Citation

  • Wang, Yihui & Ge, Xiangyu, 2025. "Digital finance, investor sentiment, and corporate inefficient investment," Finance Research Letters, Elsevier, vol. 83(C).
    • Handle: RePEc:eee:finlet:v:83:y:2025:i:c:s154461232500947x
    DOI: 10.1016/j.frl.2025.107688
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