Digital Infrastructure and Corporate Financialization

Abstract

Digital infrastructure has become a key condition shaping firms' operations, but its possible role in encouraging firms to move resources away from real activities toward financial assets has not been fully examined. Based on firm-year observations of Chinese A-share listed companies during 2009-2023, this study investigates how digital infrastructure affects the financialization of non-financial firms. The empirical results indicate that stronger digital infrastructure is associated with a higher proportion of financial assets, suggesting that digital infrastructure intensifies corporate financialization. Further analysis suggests that digital infrastructure may operate through three channels: strengthening perceived business risk, easing financing constraints, and releasing funds by improving the efficiency of investment in core business activities. The heterogeneity results show that the effect is stronger for firms in southern and eastern regions and for firms audited by Big Four accounting firms. The findings reveal a potential unintended consequence of digital infrastructure and provide empirical evidence for preventing financialization risks in the process of digital economy development.