A Study on the Effect of Digital Finance on Firm Employment

Abstract

Under the fast development of digital economy, the deep mixing of digital technology and financial system has created a new financial model called digital finance. This model is changing how firms use resources and make business decisions. Compared with traditional finance, digital finance uses big data, AI, and mobile internet to reduce information gaps, improve financial service efficiency, and make it easier for firms to get money. However, we still do not have enough micro-level evidence on how digital finance affects firm employment and through what channels. Using panel data of Chinese A-share listed firms from 2009 to 2024, together with the Peking University Digital Financial Inclusion Index, this paper studies the effect of digital finance on firm employment size. We also look at two possible channels: financing constraints and firm innovation. Our findings are: (1) Digital finance can significantly increase firm employment. This result stays strong after we control for firm fixed effects, year fixed effects, and many firm-level characteristics. (2) The mechanism analysis shows that digital finance raises employment mainly by easing financing constraints and promoting innovation activities. (3) The heterogeneity analysis shows that the employment effect differs across ownership types, technology levels, and regions. Firms with more resources and higher innovation ability benefit more. This paper expands the research on the economic effects of digital finance, adds new views to the study of digital economy and employment from the angle of financial resource allocation, and offers policy ideas for using digital finance to support the real economy and improve job quality.