Fintech, information heterogeneity, and the regional distribution effects of corporate financing constraints

Abstract

Considering the transformative impact of Fintech on financial structures, this paper examines Fintech's role in promoting equitable development in developing countries from the lens of credit constraints. While existing research acknowledges that Fintech reduces information asymmetry and thereby alleviates financing constraints, it overlooks the varied impacts on different types of information. This study categorizes information into two types: standardized information that can be codified and non-standardized information that requires “tacit understanding.” Using bank-enterprise relationship data in China from 2010 to 2021, we find that Fintech acts as a “double-edged sword.” It enhances banks' abilities to access standardized information, mitigating financing constraints in less developed areas, but also weakens their capability to process non-standardized information, potentially undermining these benefits. Additionally, the impact of Fintech varies depending on company size and ownership. Our study also shows that refinancing policies are more effective than fiscal subsidies in overcoming the limitations of Fintech.