Digital Finance And Default Risk Of Enterprises

With the continuous development of the bond market,China’s market default risk has been released in recent years.Several highly rated state-owned enterprises have defaulted one after another,which sounded the alarm for preventing default risks in the financial market.At present,China’s digital finance has come to the forefront of the world.A large amount of literature shows that digital finance has important benefits for business activities and financing constraints,which are precisely the important factors that influence the risk of default.In addition,as financial innovation,the development of digital finance is also accompanied by certain risks.Under comprehensive consideration,can digital finance suppress the risk of corporate default or will it further expand the risk of default? What are its impact channels? And what factors influence the relationship between digital finance and the risk of default?This paper adopts a combination of theoretical research and empirical tests to address the above issues.In terms of theoretical research,firstly,this paper combs through research on areas related to digital finance and default risk.Secondly,by combining the relevant principles of transaction cost theory,information asymmetry theory,and risk management theory,the micro-mechanisms and heterogeneity of digital finance influencing default risk are logically deduced.Thirdly,it analyzes the intermediary mechanism between digital finance and default risk from four perspectives of enterprise agency cost,financing constraint,leverage ratio,and innovation level.Finally,we discuss the role of digital finance in preventing the risks of digital enterprises from the current situation of digital upgrading of enterprises and the necessity of financial regulation from the two sides of the development of digital finance.In terms of empirical testing,this paper adopts a simplified default probability model constructed by Bharath and Shumway to measure default risk and uses the "Peking University Digital Inclusive Finance Index" as a proxy variable for digital finance to conduct a basic regression test of digital finance on default risk.It also examines the differences in the impact of digital finance on default risk across firm life cycles and economic regions in which they are located through group regressions.The paper further investigates the mechanisms of principal-agent cost,financing cost and constraint,corporate leverage,and corporate innovation through the mediating effect model.Then,the interaction terms of financial regulation and digital finance are introduced to examine the moderating effects of the level of enterprise digitalization and financial regulation on the relationship between the two.Finally,the paper adopts the instrumental variables method to test the endogeneity,conduct variable substitution and replace the model to ensure the robustness of the results.After the empirical test,the following research conclusions are obtained in the study:First,First,the development of digital finance can effectively decrease the default risk of enterprises,and the development of the three sub-dimensions of digital finance – the breadth of coverage,depth of use and digitization-are all beneficial in decreasing the default risk of enterprises.Second,the heterogeneity analysis shows that digital finance is more effective in reducing default risk for firms in the growth and maturity stages;it is more effective in decreasing default risk for firms in the eastern region than in the central and western regions.Third,the mechanism analysis shows that digital finance reduces the default risk of firms mainly through four channels: principal-agent cost,firm leverage,financing constraints,financing costs,and firm innovation.Fourth,the moderating effect analysis shows that the effect of digital finance is more effective for enterprises with a high level of enterprise digitalization;the utility of digital finance in decreasing enterprise default risk is greater in regions with a high level of financial regulation.The research in this paper not only enriches the study of the microeconomic effects of digital finance from the perspective of default risk,but also expands the study of macroscopic influencing factors of enterprise default risk from the perspective of financial innovation development.In addition,this paper explores the transmission mechanism between digital finance and default risk,and incorporates enterprise digitization and financial regulation into the research system.This not only considers the information infrastructure at the enterprise level,but also forms a research framework that combines digital finance,default risk,and financial regulation.It has positive practical significance for both enterprises to prevent default risk,financial institutions to develop digital finance,and even regulatory authorities to carry out the institutional design.