Digital finance and stock market participation: The case of internet wealth management products in China

Digital financing platforms have enhanced accessibility for households to engage in wealth management products, but their impact on stock market participation remains underexplored in the literature. This paper investigates the effect of Internet wealth management products on households' propensity to invest and participate in the stock market, using the reputable micro-level dataset of the China Household Finance Survey encompassing 40,011 households. Our findings reveal that purchasing Internet wealth management products positively and significantly influences households' inclination to invest and their stock market participation levels. Moreover, households with Internet wealth management products exhibit higher financial awareness and a heightened interest in financial news. These characteristics not only reduce information costs but also promote stock market participation. Furthermore, the impact of purchasing Internet wealth management products on stock market participation is more pronounced among households with higher education levels, lower-income risk, and in regions with a more developed financial market.