Does digitalization reduce corporate bond financing costs? Evidence from China

Rapid advances in digital technologies are reshaping firms’ financing conditions. Using a panel dataset comprising 2,295 firm-year observations from 746 A-share companies listed on the Shanghai and Shenzhen Stock Exchanges from 2010 to 2023, this study employs a two-way fixed-effects model to examine the relationship between corporate digitalization and bond financing costs. The empirical results indicate a significant negative association between corporate digitalization and bond financing costs. Further analysis of the underlying mechanisms suggests that digitalization reduces information asymmetry between bond issuers and investors, alleviates financing constraints, and enhances investment efficiency, thereby lowering bond financing costs. The heterogeneity analysis indicates that this cost-reducing effect is more pronounced among non-high-tech firms, firms facing lower perceived economic policy uncertainty, and firms located in regions with higher levels of industrial digitalization. This study incorporates corporate digitalization into the bond-pricing framework. It provides new evidence from the bond market on the economic consequences of digitalization, thereby deepening understanding of the relationship between digitalization and bond financing costs.