Does information communication promote financial development? Empirical evidence from China

Abstract

Sound information communication is an important guarantee of financial development. In this study, the impact of information communication on financial development is analyzed using panel data on Chinese cities. The instrumental variable method is adopted to deal with endogeneity between information communication and financial development, and a quasi-natural experiment is conducted to further alleviate endogeneity. Finally, we consider the heterogeneity of the impact of information communicated on financial development. The results show that information communication facilities, information communication levels, and information communication penetration rates can promote urban financial development. Financial development improves significantly in the pilot cities under the implementation of “Broadband China” strategy. And the impact of information communicated on financial development is more obvious in cities in the Northeast Economic Circle, the Pan-Pearl River Delta Economic Circle, the Southwest Economic Circle in China, and cities with a low level of foreign investment.