The impact of Fintech regulation on firms' financialization Evidence from a quasi-natural experiment in China

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Abstract
Firms can leverage Fintech to optimize capital allocation. This paper examines the impact of China's 2016 Fintech regulatory policy on firms' financialization, along with its influencing mechanisms and economic consequences. The results show that Fintech regulation significantly reduces financial assets investment of listed companies in China through the mitigated precautionary and speculative incentives, leading to the economic consequences of declining real assets investment, reducing short-term profits, and eventually decreasing market value of listed companies. Therefore, this paper not only contributes to existing literature on Fintech and firms' financialization, but also offers valuable policy insights for optimization of Fintech regulation framework.

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