Impacts of administrative penalties towards digital technology companies on business credit supply

Abstract Administrative penalties towards digital technology companies (APDTs) have emerged prominently in recent years as the Chinese government has started to impose these penalties on digital technology firms for their increasing frequency of legal violations. These penalties are expected to significantly influence the behavior of businesses in various governmental jurisdictions. To investigate the impact of APDTs on the level of business credit supply (BCS), this paper conducts an empirical analysis grounded in theoretical derivation. Using data from APDTs in Chinese cities and A‐share listed companies in China, the study examines the effect of APDTs on BCS and its underlying mechanisms. The findings indicate that APDTs incentivize enterprises to enhance their BCS. Additionally, as municipal governments intensify APDTs, local enterprises demonstrate an increased level of BCS. This is attributed to heightened industry competition resulting from APDTs, which amplifies the pressure on enterprises to extend credit and increases revenue incentives. Consequently, enterprises are driven to augment their BCS to facilitate credit sales and drive revenue growth. This study provides empirical evidence detailing the microeconomic consequences of APDTs, offering theoretical insights to advance the development of digital technology and optimize financial resource allocation, thereby alleviating enterprise financing constraints.