Does FinTech improve the investment efficiency of enterprises? Evidence from China’s small and medium-sized enterprises

Using the number of FinTech firms in each prefecture-level city to measure its development, this study explores the impact of FinTech on the investment efficiency of small and medium-sized enterprises (SMEs). The results show that FinTech development can significantly promote the investment efficiency of local SMEs. These results remain robust after conducting a series of robustness tests, including replacing alternative, dependent variables, controlling for firm fixed effects, controlling for time-varying fixed effects, and using the instrumental variable approach and Difference-in-difference (DID) methods. The mechanism analysis shows that FinTech alleviates the financing constraints of SMEs by reducing the information asymmetry between financial institutions and SMEs, thereby improving their investment efficiency. In addition, a heterogeneity analysis shows that the impact of FinTech on the investment efficiency of SMEs is more pronounced in small-scale private enterprises, industries lacking competition, and cities with slow marketization. Moreover, the findings have important practical significance in the form of policy suggestions for promoting the integration of FinTech and the real economy.