The Impact of the Development of Digital Finance on Regional Financial Risks

Based on the inter-provincial panel data in China from 2015 to 2022, this paper uses the fixed effect model and the intermediary effect model to explore the impact and mechanism of digital finance development on regional financial risks. The results show that: (1) the development of digital finance significantly reduces regional financial risk on the whole, and the regional financial risk index decreases by 0.234 percentage points for every 1 percentage point increase in the level of digital finance development; (2) the development of digital finance affects regional financial risk through three channels: information efficiency improvement, risk diversification and market structure optimization, and the intermediary effect of information efficiency improvement is the most significant, accounting for 42.6% of the total effect; (3) There is significant regional heterogeneity in the inhibitory effect of digital finance development on regional financial risks, with the most obvious effect in the eastern region, followed by the central and western regions. (4) The impact also shows different characteristics at the level of different economic cycles and industrial structures. Based on the research conclusions, this paper puts forward policy suggestions such as improving the digital financial regulatory system and optimizing the regional risk prevention and control mechanism.