Blockchain Technology and Corporate Default Risk

Abstract

Blockchain technology is a prominent technological innovation and firms increasingly engage in the initiatives. But blockchain technology is still in its early stage and a thorough understanding of its financial values remains elusive. By employing a large sample of public firms listed in China market, this study aims to estimate the impact of blockchain initiatives on firm default risk. Using an instrumental variable and Heckman two-stage, these results reveal a strong and negative association between blockchain initiatives and firm default risk by model. The authors further empirically demonstrate three underlying economic mechanisms. Specifically, they find that blockchain technology has the potential to enhance trust between firms and stakeholders in the supply chain, optimize business processes, and improve the information disclosure quality, which are beneficial to lower corporate financing cost or improve operation performance.