The digital economy and corporate financialization: evidence from China

The digital economy exerts a multifaceted influence on corporate operations and strategic decision-making; however, its impact on corporate financialization remains unclear. Using data from Chinese A-share-listed firms spanning 2013 to 2023, this study examines the restraining effect of the digital economy on corporate financialization. The empirical findings reveal that the digital economy significantly curbs corporate financialization, primarily by alleviating financing constraints and boosting research and development expenditures. Further analysis shows that this restraining effect is more pronounced in cities characterized by deep integration between the digital and real economies and by advanced digital infrastructure, as well as among firms with strong political connections and firms that share a large number of common institutional investors. Based on these findings, we also conduct a heterogeneity analysis and offer targeted policy recommendations.