Peer Effects in Corporate Financialization: The Role of Fintech in Financial Decision Making

Abstract

This paper develops a three-period theoretical model of corporate investment decision-making to illustrate the impact of peer effects on corporate financialization and the influence of Fintech on peer effects in corporate financialization. To empirically examine the framework, we utilize 27,697 firm-year observations from Chinese A-share listed companies between 2011 and 2021 in a panel data setting. Findings show that there is a significant and positive relationship between the degree of corporate financialization and peer effects. In addition, Fintech can mitigate the ‘peer effects’ of corporate financialization among companies located in the same geographic region, regardless of their industrial affiliation. We further demonstrate that companies' perceptions of uncertainty arising from market competition, regulatory policy, monetary policy, and fiscal policy are important mechanisms for the peer effect of corporate financialization and the influence of Fintech on peer effects in corporate financialization. Our results remain qualitatively consistent after conducting a set of robustness checks.

Keywords: Corporate financialization, Peer effects, Fintech, Behavioral economics, High-quality development of corporate