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How does financial development affect the allocation of entrepreneurs’ activities?

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  • Baishu, CHANG
  • Xiaoqing, JI
  • Rui, YANG

Abstract

This study uses CPES data to examine how financial development reduces the distortion in entrepreneurs’ activity allocation. Results show it promotes productive activities by alleviating financing constraints and improving capital allocation, while more strongly suppressing unproductive activities, thereby promoting entrepreneurs’ activity allocation rationally. The effect is more pronounced in northern and central regions. Among financial development dimensions, financial marketization has the greatest impact, followed by accessibility, efficiency, and depth. These findings highlight financial development’s key role in guiding entrepreneurs toward productive activities and offer insights for promoting high-quality development in China.

Suggested Citation

  • Baishu, CHANG & Xiaoqing, JI & Rui, YANG, 2025. "How does financial development affect the allocation of entrepreneurs’ activities?," Finance Research Letters, Elsevier, vol. 85(PC).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pc:s1544612325012474
    DOI: 10.1016/j.frl.2025.107989
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