How does the development of digital financial inclusion affect the total factor productivity of listed companies? Evidence from China

Since 2010, the Chinese government has focused on supporting the development of financial inclusion through various policies. New technological advances have led to the vigorous development of digital financial inclusion, which has a broad impact on market participants. We examine how digital financial inclusion affects the total factor productivity of listed companies in China. Using data on listed companies and the Digital Financial Inclusion Index from 2011 to 2020, our empirical results show that the development of digital financial inclusion has no positive impact on the total factor productivity of listed companies. Although previous studies have shown that digital financial inclusion can solve the financing constraints of small and micro enterprises, our results prove that it cannot play a similar role in the sample of listed companies. We find this negative effect to be significant for state-owned enterprises, but not for a separate sample of non-state-owned enterprises. However, in large cities with concentrated financial resources, digital financial inclusion can greatly improve the productivity of listed companies, which indicates that the development of digital finance requires the solid foundation of traditional financial systems to be fully effective.