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Industrial policy plays a significant role in driving firm innovation. However, prior research presents evidence that firms may strategically cater to the policy in the process of implementation to gain favorable policy outcomes. This study examines how the development of FinTech affects firms’ research and development (R&D) manipulation behavior and innovation performance. Using a sample of Chinese listed firms from 2008 to 2020, we find a negative relationship between local FinTech development and manipulation in firms’ R&D. We also find the mitigating impact of FinTech is attributed to its dual role of reducing information asymmetry and easing financing constraints and is more pronounced for firms located in regions with higher marketization, non-state and politically connected enterprises, and small and medium-sized enterprises. Additional tests suggest that FinTech significantly improves the quality and efficiency of firm innovation, which ultimately enhances corporate value. Overall, our findings provide new insights supporting the development of FinTech.
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Cao et al. (2023) studied this question.
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