Digital finance and corporate bankruptcy risk: Evidence from China

This study explores the impact of digital finance on bankruptcy risk in Chinese A-share listed firms. Using the digital finance index developed by PKU-DFIIC to measure the degree of development of regional digital finance, we find that digital finance negatively affects firms' bankruptcy risk. This effect occurs by improving firms' information transparency and mitigating their financial leverage. Furthermore, we find that this negative impact is greater in small firms and in riskier firms. This study contributes to the digital finance literature by identifying the impact of digital finance on corporations at the micro level and by providing additional evidence supporting the role of digital finance as an external governance mechanism.