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The impact of digital finance on resource allocation efficiency: evidence from China

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  • Zheng Duan
  • Yifan Zhang

Abstract

Digital finance presents new opportunities for enterprise development. This study develops a digital finance index utilizing data from Chinese prefecture-level cities and listed companies between 2011 and 2021, employing the OP and LP methods to assess resource allocation efficiency. The impact of digital finance on efficiency was analysed using a two-way fixed-effects model alongside an instrumental variable approach, while a two-step methodology was adopted to explore the underlying mechanisms. The findings demonstrate that digital finance significantly enhances resource allocation efficiency by broadening financing channels, improving corporate fund utilization, and reducing information asymmetry. Furthermore, the improvement in resource allocation efficiency attributed to digital finance is particularly pronounced in regions with higher per-capita income, larger urban populations, and state-owned enterprises. This study contributes a novel perspective on resource allocation efficiency and provides policy implications for effectively harnessing the opportunities afforded by digital finance in the contemporary era, thereby maximizing the benefits of the digital age and improving resource allocation efficiency.

Suggested Citation

  • Zheng Duan & Yifan Zhang, 2025. "The impact of digital finance on resource allocation efficiency: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 57(38), pages 5807-5821, August.
    • Handle: RePEc:taf:applec:v:57:y:2025:i:38:p:5807-5821
    DOI: 10.1080/00036846.2024.2425116
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