Digital Financial Inclusion, Financing Constraints, and Stock Price Volatility
Journal: Modern Economics & Management Forum DOI: 10.32629/memf.v6i6.4654
Abstract
Stock price stability plays a crucial role in maintaining the stability of financial markets. With the rapid advancement of technology, digital financial inclusion has been widely adopted. However, its potential impact on stock price volatility remains underexplored.This study matches provincial-level digital financial inclusion data from 2011 to 2022 with the stock price volatility data of A-share listed firms in China to empirically examine the influence of digital financial inclusion on stock price volatility. The results reveal that digital financial inclusion significantly reduces stock price volatility. Mechanism analysis shows that the development of digital finance alleviates corporate financing constraints, and the relaxation of such constraints plays a significant role in reducing stock price volatility. The heterogeneity analysis indicates that the suppressing effect of digital finance on stock volatility is more pronounced among large-scale and private enterprises. This paper enriches the research on digital financial inclusion and stock market volatility and provides theoretical and policy implications for promoting the stability of financial and capital markets.
Keywords
digital financial inclusion, financing constraints, stock price volatility
Full Text
PDF - Viewed/Downloaded: 2 TimesReferences
[1]Chang K, Cheng X, Wang Y, et al. The impacts of ESG performance and digital finance on corporate financing efficiency in China[J]. Applied Economics Letters, 2023, 30.
[2]Tang X, Ding S, Gao X, et al. Can digital finance help increase the value of strategic emerging enterprises?[J]. Sustainable Cities and Society, 2022, 81.
[3]Feng S, Zhang R, Li G.Environmental decentralization, digital finance and green technology innovation[J].Structural Change and Economic Dynamics, 2022, 61.
[4]Croux C, Reusens P. Do stock prices contain predictive power for the future economic activity? A Granger causality analysis in the frequency domain[J]. Journal of Macroeconomics, 2013, 35.
[5]Tiwari A K, Mutascu M I, Albulescu C T, et al. Frequency domain causality analysis of stock market and economic activity in India[J]. International Review of Economics & Finance, 2015, 39.
[6]Lin B, Ma R. How does digital finance influence green technology innovation in China? Evidence from the financing constraints perspective[J]. Journal of environmental management, 2022, 320.
[7]Liu Y, Luan L, Wu W, et al. Can digital financial inclusion promote China's economic growth?[J]. International Review of Financial Analysis, 2021, 78.
[8]Miller, Edward M. "Risk, uncertainty, and divergence of opinion." The Journal of finance 32.4 (1977): 1151-1168.
[9]Fang, Lily, and Joel Peress. "Media coverage and the cross‐section of stock returns." The journal of finance 64.5 (2009): 2023-2052.
[10]Dasgupta, Sudipto, Jie Gan, and Ning Gao. "Transparency, price informativeness, and stock return synchronicity: Theory and evidence." Journal of Financial and Quantitative analysis 45.5 (2010): 1189-1220.
[11]Hana H B, Manry D. The Value-relevance of R&D and Advertising[J]. The International Journal of Accounting, 2004, 39: 155-173.
[12]Chiyachantana, Chiraphol N., et al. "International evidence on institutional trading behavior and price impact." The Journal of Finance 59.2 (2004): 869-898.
[13]Zhu Y, Zhu X. European business cycles and stock return predictability[J]. Finance research letters, 2014, 11(4).
[14]Paetz M, Gupta R. Stock price dynamics and the business cycle in an estimated DSGE model for South Africa[J]. Journal of International Financial Markets, Institutions and Money, 2016, 44.
[15]Guo J. Causal relationship between stock returns and real economic growth in the pre-and post-crisis period: evidence from China[J]. Applied Economics, 2015, 47(1).
[16]Ai Y, Sun G, Kong T. Digital finance and stock price crash risk[J]. International Review of Economics & Finance, 2023, 88.
[17]Jiang K, Du X, Chen Z. Firms' digitalization and stock price crash risk[J]. International review of financial analysis, 2022, 82.
[18]Myers, S.C., and N.S.Majluf.1984. “Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have.”Journal of Financial Economics 13(2).
[19]Kaplan,S.N., and L.Zingales.1997.“Do Investment-cash Flow Sensitivities Provide Useful Measures of Financing Constraints?”Quarterly Journal of Economics 112(1).
[2]Tang X, Ding S, Gao X, et al. Can digital finance help increase the value of strategic emerging enterprises?[J]. Sustainable Cities and Society, 2022, 81.
[3]Feng S, Zhang R, Li G.Environmental decentralization, digital finance and green technology innovation[J].Structural Change and Economic Dynamics, 2022, 61.
[4]Croux C, Reusens P. Do stock prices contain predictive power for the future economic activity? A Granger causality analysis in the frequency domain[J]. Journal of Macroeconomics, 2013, 35.
[5]Tiwari A K, Mutascu M I, Albulescu C T, et al. Frequency domain causality analysis of stock market and economic activity in India[J]. International Review of Economics & Finance, 2015, 39.
[6]Lin B, Ma R. How does digital finance influence green technology innovation in China? Evidence from the financing constraints perspective[J]. Journal of environmental management, 2022, 320.
[7]Liu Y, Luan L, Wu W, et al. Can digital financial inclusion promote China's economic growth?[J]. International Review of Financial Analysis, 2021, 78.
[8]Miller, Edward M. "Risk, uncertainty, and divergence of opinion." The Journal of finance 32.4 (1977): 1151-1168.
[9]Fang, Lily, and Joel Peress. "Media coverage and the cross‐section of stock returns." The journal of finance 64.5 (2009): 2023-2052.
[10]Dasgupta, Sudipto, Jie Gan, and Ning Gao. "Transparency, price informativeness, and stock return synchronicity: Theory and evidence." Journal of Financial and Quantitative analysis 45.5 (2010): 1189-1220.
[11]Hana H B, Manry D. The Value-relevance of R&D and Advertising[J]. The International Journal of Accounting, 2004, 39: 155-173.
[12]Chiyachantana, Chiraphol N., et al. "International evidence on institutional trading behavior and price impact." The Journal of Finance 59.2 (2004): 869-898.
[13]Zhu Y, Zhu X. European business cycles and stock return predictability[J]. Finance research letters, 2014, 11(4).
[14]Paetz M, Gupta R. Stock price dynamics and the business cycle in an estimated DSGE model for South Africa[J]. Journal of International Financial Markets, Institutions and Money, 2016, 44.
[15]Guo J. Causal relationship between stock returns and real economic growth in the pre-and post-crisis period: evidence from China[J]. Applied Economics, 2015, 47(1).
[16]Ai Y, Sun G, Kong T. Digital finance and stock price crash risk[J]. International Review of Economics & Finance, 2023, 88.
[17]Jiang K, Du X, Chen Z. Firms' digitalization and stock price crash risk[J]. International review of financial analysis, 2022, 82.
[18]Myers, S.C., and N.S.Majluf.1984. “Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have.”Journal of Financial Economics 13(2).
[19]Kaplan,S.N., and L.Zingales.1997.“Do Investment-cash Flow Sensitivities Provide Useful Measures of Financing Constraints?”Quarterly Journal of Economics 112(1).
Copyright © 2025 Shuaikang Liu
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License