Abstract
This paper uses the panel data of Chinese listed enterprises from 2010 to 2019 to explore the relationship between digital finance (DF) and enterprise investment efficiency. The result of two-way fixed effects regression shows that the DF significantly improves enterprise investment efficiency. And the result is robust to different indicators of digital finance and possible endogenous biases. Further mechanism analyses find that the impact of DF on total debt was insignificant whereas it significantly changes financial composition which in turn affects the investment efficiency of enterprises. Specifically, the mediating effect of financial structure changes in both magnitude and direction with respect to the type of loans, and investment efficiency of under- and over-invested enterprises responses asymmetrically to the DF-induced financial structure adjustments. Overall, financial diversity decreases significantly with the inclusion of DF, which in turn improves enterprise investment efficiency. The results of this paper indicate that, in order to improve investment efficiency, the composition adjustment effect of DF should be further exerted with financing inclined to credit loans and guaranteed loans and guarding against excessive looseness of mortgage loans.
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