Does Fintech Innovation Mitigate Firm Expense Stickiness? Evidence From China

ABSTRACT We examine the impact of Fintech innovation on firm expense stickiness. Based on a sample of Chinese A‐share firms from the years 2014 to 2022, with manually collected data of Fintech patents from CNIPA , we document that expense stickiness decreases for firms in the region with greater Fintech innovation using a DDD research design. The mechanism analysis suggests that the restraining agency problem driver is the main channel of the impact of Fintech innovation on firm expense stickiness. The heterogeneity test based on the TOE framework finds that technological capabilities enhance the mitigating effect of Fintech innovation on expense stickiness, whereas the organisational and environmental dimensions show a substitutive relationship with Fintech innovation. Economic analysis reveals that while a firm's risk generally rises as a result of increased cost stickiness, Fintech innovation can provide significant benefits to offset this rise in firm risk.