FinTech, financing constraints and risk-taking by small and medium-sized enterprises
Ningxian Jin, Ya Bu, Yuting Wang, Yuchen Zhang, Hui LiPurpose
This paper investigates whether financial technology (FinTech) development enhances the risk-taking capacity of small and medium-sized enterprises (SMEs) and clarifies the underlying mechanism. In particular, it examines whether FinTech affects firms' risk decisions by alleviating financing constraints and whether this effect varies across ownership structures, industries, and regions.
Design/methodology/approach
The study develops a risk-adjusted decision-making model by extending the CAPM framework to incorporate SME financing costs, formally deriving the link between FinTech, financing constraints, and optimal risk-taking. Using panel data on Chinese listed SMEs from 2011 to 2022, the paper employs two-way fixed-effects regressions. Mediation analysis tests the financing-constraint channel, while instrumental-variable estimation and multiple robustness checks address endogeneity.
Findings
The results show that FinTech development significantly increases SMEs' risk-taking levels. Financing constraints play a key mediating role: FinTech reduces financing costs, improves risk-adjusted returns and incentivizes firms to undertake riskier investments. The effect is robust across alternative measures and identification strategies. Heterogeneity analyses reveal that the positive impact is concentrated among non-state-owned firms, manufacturing SMEs, and enterprises in economically developed regions.
Originality/value
This study contributes by offering a micro-founded theoretical framework linking FinTech to SME risk-taking through financing constraints. It extends asset pricing theory to firm-level risk decisions under credit frictions and constructs a novel, multidimensional FinTech index using web-based data. The findings provide new evidence on the real effects of FinTech and inform policies aimed at improving SME financing and growth.