Commercial bank digital transformation, information costs, and corporate financial constraints

Abstract

The rapid development of digital finance has transformed traditional financial institutions. We investigate the effect and economic consequences of bank digital transformation on corporate financial constraints using data from China. The results show that bank digital transformation alleviates corporate financial constraints by decreasing information search, processing, and verification costs. Furthermore, the effect of bank digital transformation on corporate financial constraints is more pronounced for firms with higher contract intensity, more intangible assets, and poorer external information environment. We also find that bank digital transformation alleviates corporate financial constraints by increasing debt financing. In addition, we show that digital transformation promotes lending by big banks, resulting in the crowding-out effect. Finally, we find that bank digital transformation promotes the flow of credit resources to non-zombie firms, which effectively improves credit allocation efficiency. This paper extends research on digital finance and new structural finance from the perspective of bank digital transformation.

Keywords

• Digital finance
• commercial bank digital transformation
• information costs
• financial constraints