Abstract
The development of digital inclusive finance has changed commercial banks' credit to some extent. We construct the panel data of commercial banks from 2011-2021 and use a two-way fixed effect model to study effects of digital inclusive finance on the adverse selection of commercial banks. The results show that digital inclusive finance has a significant negative effect on adverse selection of commercial banks, and the effect is stronger in eastern regions and rural commercial banks. The evidence strongly suggests that digital inclusive finance reduces the risk of adverse selection of commercial banks by promoting the development of financial technology and reducing the risky asset ratio of commercial banks in a way that excludes the mechanism of action of commercial bank soundness. These results have important implications for the development of the traditional financial industry, and commercial banks could use digital inclusive finance to reduce adverse selection risk and achieve digital transformation.
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