Does corporate digitization affect shadow banking business? Evidence from Chinese listed companies

How to govern non-financial enterprises engaged in shadow banking activities is of great practical significance. This study investigates whether and how corporate digitization affects shadow banking. Using a sample of Chinese listed companies for the period 2012-2022, we find that corporate digitization has a significant negative effect on shadow banking business. Mechanism tests show that corporate digitization is conducive to enhancing product core competencies, broadening market channels, and improving operational efficiency, thus inhibiting firms from engaging in shadow banking activities. Moreover, the negative impact of corporate digitization on corporate shadow banking is especially noticeable for non-state-owned companies and in areas where local governments have more stringent financial risk regulations. The findings contribute to enriching the literature on the determinants of corporate shadow banking business, and deepen our understanding of the economic consequences of corporate digitization.