Exploring the impact of the level of financial technology on the total factor productivity of firms based on heterogeneity analysis

Abstract

This paper examines how financial technology (fintech) affects the total factor productivity (TFP) of firms using a sample of 370 GEM-listed companies in China from 2015 to 2020. The results indicate that fintech level has increased steadily over this period and has a positive and significant effect on TFP. The paper further investigates the underlying mechanisms and finds that fintech enhances TFP by easing financing constraints and lowering agency costs. Moreover, the paper conducts heterogeneity analysis and reveals that fintech has a larger impact on TFP for firms located in less developed regions and for private-owned firms. The paper concludes with some policy implications for leveraging fintech to improve financial inclusion and facilitate high-quality economic development in China.