Finance Research Letters xxx (xxxx) xxx

Contents lists available at ScienceDirect

Finance Research Letters

journal homepage: www.elsevier.com/locate/frl

Local FinTech development and stock price crash risk

Xinyue Wang a, Yuqiang Cao a, *, Zhuoan Feng b, Meiting Lu c, Yaowen Shan d
a
School of Accounting, Guangdong University of Foreign Studies, China
b
School of Accounting, Finance and Economics, University of Waikato, Hamilton, Waikato, New Zealand
c
Macquarie Business School, Macquarie University, Australia
d
UTS Business School, University of Technology Sydney, Australia

A R T I C L E I N F O A B S T R A C T

JEL: This study investigates the effect of financial technology (FinTech) development on stock price
G10 crash risk. We show that the development of FinTech can inhibit management from deliberately
G30 hiding bad news and alleviate information asymmetry, thereby reducing stock price crash risk.
Keywords: This effect is more pronounced among non-state-owned enterprises, firms with poor information
Local FinTech development environments and low-quality internal controls, and those in competitive industries and regions
Stock price crash risk
with high marketization. Overall, these findings suggest that FinTech development can mitigate
China
the deliberate concealment of bad news by management and improve the timeliness of disclosure,
leading to lower risks faced by investors.

1. Introduction

Financial technology (FinTech) is technology-driven financial innovation, a new financial ecology outside the traditional financial
system. FinTech development can substantially impact financial markets, financial institutions, and the delivery of financial services.
Prior studies mainly focus on the effects of FinTech on the macro-level and banking industry.1 Besides the macro-level research,
emerging studies investigate the effects of FinTech on the micro-level debt market. These studies argue that FinTech can optimize
credit resource allocation (Fuster et al., 2019), mitigate corporate financing constraints (Cheng et al., 2014), and improve corporate
innovation capacity (Ding et al., 2022). However, the impact of FinTech on the capital market at the micro-level remains largely
unexplored.
In this paper, we investigate whether the degree of local FinTech development affects a firm’s stock price crash risks. Theoretically,
there is an upper limit for firms to accommodate negative news. When negative information exceeds the upper limit, the management
has to release such information in a concentrated manner, causing a substantial impact on the firm’s stock price and triggering a crash

* Corresponding author at: School of Accounting, Guangdong University of Foreign Studies, Guangzhou, Guangdong, China.
E-mail address: caoyuqiang@gdufs.edu.cn (Y. Cao).
1
The existing literature finds that FinTech can boost employment, increase population income, and promote the growth of GDP per capita, thus
increasing consumer spending and alleviating income disparity (Hua and Huang, 2021; Kanga et al., 2022; Li et al., 2020). Furthermore, prior
literature has also explored the impact of FinTech on banks and finds that information technology is an important factor driving the development of
the banking industry (Berger, 2003). Recently, Daud et al. (2022) investigate the relationship between FinTech development and financial stability
in a panel of 63 countries. Hodula (2023) examines whether FinTech development is related to income inequality changes.

https://doi.org/10.1016/j.frl.2023.103644
Received 17 October 2022; Received in revised form 11 January 2023; Accepted 12 January 2023
Available online 14 January 2023
1544-6123/© 2023 Elsevier Inc. All rights reserved.

Please cite this article as: Xinyue Wang, Finance Research Letters, https://doi.org/10.1016/j.frl.2023.103644
X. Wang et al. Finance Research Letters xxx (xxxx) xxx

(Jin and Myers, 2006). Based on this argument, a stream of literature explores whether and how the ability and motivation of managers
to hide bad news, as well as other firm and institutional characteristics, influence stock collapse risks.2
We argue that the rationale for how FinTech reduces stock price crash risk is twofold. First, FinTech strengthens decision-making by
utilizing soft information and mitigating information asymmetry in corporate production and operations (Fuster et al., 2019). FinTech
enables firms to collect information in more dimensions via the Internet and big data technology, which is then analyzed by artificial
intelligence, cloud computing, and blockchain to enable firms to centralize a large amount of data to solve their critical information
asymmetry problems (Lapavitsas et al., 2008).3 Furthermore, FinTech can capture unstructured corporate data (e.g., images, videos,
and audio) from multiple levels and channels and perform structured transformations, classifications, and real-time monitoring of
structured supply chain data. Accordingly, investors can use FinTech and investment signals to improve the accuracy and quality of
stock market information and enrich their understanding of existing information to improve investment efficiency (Grennan and
Michaely, 2021).
Second, FinTech helps investors detect managerial concealment of bad news to constrain opportunistic behaviors. Cheng et al.
(2016) show that FinTech plays an information technology monitoring and governance role in improving the accuracy of analysts’
forecasts. Additionally, authorities can reduce regulatory costs and improve transparency and efficiency with FinTech development,
thereby more efficiently detecting the behaviors of managers who are hiding bad news (Zhu, 2019). Thus, we expect FinTech
development to increase costs and weaken opportunistic motives for managers to suppress bad news, leading to lower stock price
collapse risks.
China, the largest developing country and second-largest economy, has a rapidly developing FinTech industry with significant
regional variations (Ding et al., 2022; Sheng, 2021). Thus, this setting offers unique opportunities to identify the effects of local
FinTech development on the crash risks for micro firms. Using the number of FinTech firms in the firm’s prefecture-level city as a proxy
for the degree of local FinTech development, we find that FinTech development stabilizes stock prices by inhibiting management’s bad
news concealment, and mitigating information asymmetry. Furthermore, we find that the stabilizing effect of FinTech is more pro­
nounced among non-state-owned enterprises (non-SOEs), firms with poor external information environments and low quality of in­
ternal controls, and those in competitive industries and regions with high marketization.
Our study makes two contributions. First, we complement the micro-level literature on the role of FinTech in stabilizing and
developing capital markets and economies. The existing literature mainly explores the role of FinTech in overcoming information
asymmetries, thereby reducing the intermediation costs of credit markets (Ntwiga, 2020), alleviating corporate financing constraints
(Ding et al., 2022), and increasing firm value (Chen et al., 2019). Following the information asymmetry perspective, our study extends
the literature to the stock market and reveals the role and mechanism of FinTech in stabilizing stock prices.
Second, this study adds to the literature on managers’ disclosure decisions regarding negative information. Prior literature doc­
uments that managers have opportunistic motives in suppressing negative information for personal interests.4 In particular, managers
tend to hide bad news for extended periods of time, which eventually increases the risk of a collapse in the firm’s stock price in the
future. The existing literature documents several factors that restrict managers’ ability to hide negative information.5 Our study adds to
this literature stream and reveals the important role of FinTech development in constraining managers’ ability to conceal bad news,
thereby stabilizing stock prices.

2. Sample and research design

2.1. Sample construction

Our sample begins with all A-share listed firms available from the China Stock Market and Accounting Research (CSMAR) and Wind
databases from 2005 to 2019.6 Macro-level data is from the China Economic Information Network (CEINET) statistics database and the
China Statistical Yearbook. The final sample consists of 23,593 firm-year observations, with 2,891 A-share listed firms.7 To eliminate

2
Recent studies investigate whether stock price crash risks are influenced by local and non-local CEOs (Chen et al., 2022), corporate digital
transformation (Wu et al., 2022), managerial perspectives on climate change (Jung and Song 2023), and non-financial information disclosed by the
management (Wei and Zhang 2023).
3
The literature shows that FinTech can use these comparative advantages in information technology to empower traditional financial institutions
(Lin et al., 2013; Huang et al., 2018), help external investors access soft information more easily (Mocetti et al., 2017), and improve the ability of
banks to screen borrowers (Berg, 2020).
4
Managers may choose to hide negative information to avoid investors rejecting bad projects (Malmendier et al., 2011), pursue personal benefits
such as excess allowances (Xu et al., 2014), and avoid reputational damage, termination risks, and even legal sanctions.
5
Internal and external factors include, for example, improved accounting robustness (Kim and Zhang, 2016), improved internal controls (Kim
et al., 2011), high-quality external audits (Li et al., 2022), and legal solid institutional safeguards (MaY, 2020).
6
Our sample period starts from 2005 for two reasons. First, FinTech development in China has entered the stage of Internet finance since 2005.
Second, the first batch of third-party payment companies emerged in 2005, which was a significant breakthrough in FinTech. Our sample period
ends in 2019 to avoid the COVID-19 pandemic’s unexpected impacts on the sample, because the pandemic has halted the economy and significantly
impacted the stock market since 2020.
7
The samples are processed as follows: (1) firms from finance and insurance industries are excluded; (2) ST and PT listed companies are excluded;
(3) firms with operating revenue of less than 50 million are excluded; (5) the observations that have missing values for the main variables are
excluded.

2
X. Wang et al. Finance Research Letters xxx (xxxx) xxx

the undue influence of outliers, we winsorize the top and bottom one percentile of all continuous variables.

2.2. Research design and variable measurement

We first use the following regression model to test the relationship between the level of FinTech development and stock price crash
risks:
NCSKEWit /DUVOLit = α0 + α1 Fintechit + α2 Controls + i.Industry + i.Year + εit (1)

where the subscript i denotes the firm, t denotes the year, NCSKEWit and DUVOLit are measures of stock price crash risk; Fintech is the
degree of financial technology development; Controls is the ensemble of control variables ;8 Industry represents industry fixed effects;
Year denotes year fixed effects; εit is the error term.9 The variable of interest is Fintech, and the coefficient α1 represents the marginal
impact of FinTech on stock price crash risks. We define Fintech as the natural logarithm of the number of FinTech firms at the local and
municipal levels. We use the natural logarithmic treatment to reduce the effect of the left-skewed or right-skewed characteristics of the
number of FinTech firms. Following the prior literature (Hutton et al., 2009; Kim et al., 2011), we employ the negative return skewness
coefficient (NCSKEW) and earnings up and down ratio (DUVOL) to measure stock price crash risk.

3. Main empirical results

3.1. Baseline regression

Table 1 presents the results for the effect of the level of FinTech development on share price stability using regression model (1).
The results reported in Columns (1) and (2) of Table 1 show that Fintech is negatively associated with NCSKEW (α1 = − 0.0072, t-stat =
− 2.8487) and DUVOL (α1 = − 0.0044, t-stat = − 2.5982).10 These results support our hypothesis and indicate that FinTech develop­
ment significantly reduces the risk of share price collapse and improves share price stability.11

3.2. Robustness tests

3.2.1. Excluding the effect of omitted variables

To reduce the endogeneity of these events, we adopt the permutation tests (Fisher,1935; Ludbrook and Dudley, 1998) to examine
whether the level of FinTech development directly affects the stock price stability. We first rearrange data from different years within
our sample. Subsequently, we simulate model (1) 1,000 times, controlling fixed effects for the broad industry categories (Ind FE (1))
and three-digit industry code (Ind FE (3)). The results (untabulated) suggest that the reduction in stock crash risk for our sample is more
directly related to the increase in FinTech development than the effects of co-existing events.
Following Oster (2019), we re-estimate model (1) using a linear probability model and expect that the new R2 of model (1) will
change to 1.3 times the original R2 after introducing omitted variables. The results (untabulated) show that when β is zero, δ is 2.58 or
more, indicating that if omitted variables lead to biased estimations, the omitted variables should be about 2.58 times more important
than the currently observed control variables. Thus, omitted variables are unlikely to significantly impact our main results.

3.2.2. Instrumental variables method

We select four instrumental variables for FinTech development to further address the endogeneity concern. We first follow Bartik
(2006) to construct the share shift method instrumental variable (IVFin).12 Our second instrumental variable is the number of Internet
users at the local and municipal levels (Internet). The third and the fourth instrumental variables are the spherical distance between the

8
Control variables include firm size (Size), firm age (ListAge), gearing (Lev), profitability (ROA), growth (Growth), operating cashflow (Cashflow),
firm social wealth creativity (TobinQ), equity checks and balances (Balance), the level of economic development of the municipality where the firm is
located (G_ Gdp), and the size of the local municipality (Pop).
9
deHaan et al. (2022) find that when the main explanatory variable varies more between firms rather than within firms, the regression model is
likely to be biased if firm fixed effects are included as controls. In this paper, the main explanatory variable is the natural logarithm of the number of
FinTech firms at the municipal levels, where its variation only occurs between firms in different cities rather than within firms. Thus, it might not be
appropriate to include firm-level fixed effects in the regression.
10
Furthermore, we examine the robustness of our results in two alternative sample periods, namely the sample period after the global financial
crisis (2009-2019) and the sample period in which the development of China’s FinTech has gradually entered a mature stage (2012-2019). The
results reported in Columns (3) to (6) are consistent with those using the sample of 2005-2019 reported in Columns (1) and (2).
11
We add stock performance (RET) and stock volatility (SIGMA) as additional control variables. The results (untabulated) are consistent with
results from baseline regressions. We also include three market sentiment variables to control crash risk, namely, the consumer confidence index
(CCI) (Gong et al., 2022), the composite sentiment index in Chinese stock market (CICSI) (Yi and Mao 2009), and the investor sentiment index (ISI)
(Wei et al., 2014). The results (untabulated) are consistent with our baseline results.
12
We use the growth rate of the number of national FinTech firms multiplied by the number of regional FinTech firms lagged by one period and
then take the natural logarithm to simulate the estimated level of regional FinTech development in all years.

3
X. Wang et al. Finance Research Letters xxx (xxxx) xxx

Table 1
Baseline regression.
The impact of the FinTech sector’s level of development on the risk of a crash in listed firms’ stock prices is reported in this table using regression
analysis. The t-statistics under robust standard errors are displayed in parentheses. Significance is denoted by the symbols *, **, and *** at 10%, 5%,
and 1%, respectively.
(1) (2) (3) (4) (5) (6)

2005–2019 2009–2019 2012–2019

NCSKEW DUVOL NCSKEW DUVOL NCSKEW DUVOL

Fintech − 0.0072*** − 0.0044*** − 0.0069*** − 0.0050*** − 0.0073** − 0.0050**

(− 2.8487) (− 2.5982) (− 2.5800) (− 2.8477) (− 2.4335) (− 2.5353)
Size 0.0086 − 0.0056 0.0035 − 0.0093** 0.0111 − 0.0048
(1.5506) (− 1.4861) (0.5808) (− 2.3113) (1.5584) (− 1.0333)
Lev − 0.0057 0.0037 − 0.0169 0.0001 − 0.0095 0.0084
(− 0.1810) (0.1749) (− 0.4823) (0.0023) (− 0.2354) (0.3168)
ROA − 0.0049 − 0.0200 0.1451 0.0877 0.0749 0.0643
(− 0.0478) (− 0.2991) (1.2488) (1.1677) (0.5641) (0.7588)
Growth − 0.0260** − 0.0324*** − 0.0248* − 0.0320*** − 0.0207 − 0.0251**
(− 1.9872) (− 3.7961) (− 1.6897) (− 3.3778) (− 1.2107) (− 2.3158)
Cashflow 0.0192 0.0266 0.0846 0.0478 0.0826 0.0449
(0.2709) (0.5587) (1.0361) (0.8875) (0.8393) (0.7012)
TobinQ 0.0009 − 0.0089** 0.0042 − 0.0066* 0.0070 − 0.0059
(0.1779) (− 2.4952) (0.7527) (− 1.7775) (1.1306) (− 1.4120)
INST 0.1460*** 0.1169*** 0.1572*** 0.1212*** 0.1433*** 0.1080***
(6.1158) (7.3579) (5.9150) (6.9786) (4.6116) (5.3931)
ListAge − 0.0398*** − 0.0197*** − 0.0353*** − 0.0171*** − 0.0478*** − 0.0229***
(− 5.0304) (− 3.7088) (− 4.2139) (− 3.0532) (− 5.0122) (− 3.6472)
G_GDP − 0.0016 − 0.0028* − 0.0022 − 0.0044** − 0.0024 − 0.0047**
(− 0.6955) (− 1.7447) (− 0.8213) (− 2.4368) (− 0.6912) (− 2.0695)
Pop 0.0129* 0.0099* 0.0128 0.0123** 0.0054 0.0068
(1.6823) (1.9158) (1.4602) (2.1094) (0.5218) (1.0063)
Constant − 0.5163*** − 0.0976 − 0.4581*** − 0.0513 − 0.5570*** − 0.1027
(− 4.0559) (− 1.1382) (− 3.2806) (− 0.5520) (− 3.4041) (− 0.9540)
Year fixed effects YES YES YES YES YES YES
Industry fixed effects YES YES YES YES YES YES
N 23,592 23,592 19,591 19,591 15,678 15,678
R2 0.0540 0.0543 0.0373 0.0387 0.0326 0.0316

area where the firm is located and the two core cities, Beijing (Dis_bj) and Shenzhen (Dis_sz), respectively.13 The results in Table 2
remain robust after using the instrumental variable approach to mitigate the endogeneity problem.

3.2.3. Alternative measures and model specifications

We also conduct the following analyses and find robust results (reported in Table 3) consistent with the main results:

• Following Hutton et al. (2009), we define a dummy variable for crash risk (Crash) equal to one if the unique weekly returns (Wi,t) of
a firm’s stock is below the mean of its distribution by 3.09 standard deviations and zero otherwise.
• We replace the Fintech variable with two alternative measures of the level of FinTech development, namely the Peking University
Digital Inclusive Finance index (Index) and the breadth of coverage (Coverage).14
• We include region-level control variables such as GDP growth rate and municipality size variables, as well as Province fixed effects,
Year × Province, and Year × Industry fixed effects.
• We employ weighted regression where the weighting is region (east, central, west), city size, and economic growth, respectively.

4. Tests of possible mechanisms and heterogeneity

4.1. Tests of managerial bad-news hoarding

Prior research argues that information manipulation and asymmetry are the main contributors to stock collapses. When negative
news accumulates to a certain threshold, the bad news will be released centrally, leading to severe negative impacts on the stock price

13
We exclude direct-administrated municipalities, because they have a large difference in the level of economic development from ordinary
prefecture-level cities.
14
Index is the Peking University Digital Inclusive Finance Index, which is based on structured data of representative FinTech firms’ transactions
(Guo et al., 2020). Coverage consists of following elements: (1) the number of Alipay accounts per 10,000 people; (2) the proportion of Alipay
card-tied users; and (3) the average number of bank cards tied to each Alipay account. Coverage is correlated with the local economy but is not
directly affected by firm-level factors.

4
 X. Wang et al.
Table 2
Robustness tests: Instrumental variables method.
The results of the two-stage regression utilizing the instrumental variables approach are presented in this table. The share shift method instrumental variable, ivFin, uses the natural logarithm to simulate
estimates of the rate of regional FinTech development over time. It does this by multiplying the growth rate of the number of national FinTech companies by the number of regional FinTech companies
lagged by one order. The number of people who have local or municipal access to the Internet is known as Internet. Dis_bj and Dis_sz represent the spherical distance between the area where the firm is
located and the two core cities,Beijing (Dis_bj) and Shenzhen (Dis_sz), respectively . The t-statistics under robust standard errors are displayed in parentheses. Significance is denoted by the symbols *, **,
and *** at 10%, 5%, and 1%, respectively.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)

Fintech NCSKEW DUVOL Fintech NCSKEW DUVOL Fintech NCSKEW DUVOL Fintech NCSKEW DUVOL

IVFin 1.087***
(653.43)
Internet 1.617***
5

(113.00)
Dis_bj 0.0010***
(55.14)
Dis_sz 0.0010***
(56.70)
Fintech − 0.007*** − 0.004** − 0.426* − 0.381** − 0.019** − 0.012** − 0.016** − 0.015***
(− 2.70) (− 2.56) (− 1.66) (− 2.17) (− 2.23) (− 2.12) (− 2.11) (− 2.94)
Controls YES YES YES YES YES YES YES YES YES YES YES YES
Year fixed effects YES YES YES YES YES YES YES YES YES YES YES YES
Industry fixed effects YES YES YES YES YES YES YES YES YES YES YES YES
N 11,182 4787 8009 7960 8009 7960 18,152 18,152 18,152 18,152 18,152 18,152
First-stage F 424,219 16,089.3 3041.07 3215.47
Partial R2 0.9511 0.3544 0.1672 0.1993

Finance Research Letters xxx (xxxx) xxx

X. Wang et al. Finance Research Letters xxx (xxxx) xxx

Table 3
Robustness tests: Alternative variable measurement.
Panel A: Alternative measures of stock price crash risk and FinTech development
The results of the regressions with alternative measures of variables are presented in this table. Crash is a dummy variable equal to one when the weekly return Wi,t
of a company’s stock for a week in a year is 3.09 standard deviations below the mean of its distribution, and zero otherwise. The results of alternative measures of
FinTech development are presented in this table. The Peking University Digital Inclusion Index’s composite index is represented in columns (2) and (3), and its
separate indices for the index’s breadth of coverage are represented in columns (4) and (5). The t-statistics under robust standard errors are displayed in parentheses.
Significance is denoted by the symbols *, **, and *** at 10%, 5%, and 1%, respectively.

(1) (2) (3) (4) (5)

Crash NCSKEW DUVOL NCSKEW DUVOL

Fintech − 0.0019*
(− 1.7480)
Coverage − 0.0780** − 0.0486**
(− 2.1947) (− 2.0642)
Index − 0.0857* − 0.0572*
(− 1.6972) (− 1.7153)
Controls YES YES YES YES YES
Year fixed effects YES YES YES YES YES
Industry fixed effects YES YES YES YES YES
N 23,593 17,147 17,147 17,147 17,147
R2 0.0235 0.0318 0.0299 0.0317 0.0298

Panel B: Alternative structures of fixed effects

The results of alternative structures of fixed effects are presented in this table. Regression results controlling for Province fixed effects are presented in columns (1)
and (2), and regression results controlling for Year × Industry and Year × Province high-dimensional fixed effects are presented in columns (3) and (4). The t-statistics
under robust standard errors are displayed in parentheses. Significance is denoted by the symbols *, **, and *** at 10%, 5%, and 1%, respectively.

(1) (2) (3) (4)

NCSKEW DUVOL NCSKEW DUVOL

Fintech − 0.0115** − 0.0070** − 0.0116** − 0.0073**

(− 2.4028) (− 2.2098) (− 2.3277) (− 2.1946)
Controls YES YES YES YES
Year fixed effects YES YES YES YES
Industry fixed effects YES YES YES YES
Province fixed YES YES YES YES
effects
Year × Industry NO NO YES YES
Year × Province NO NO YES YES
N 23,592 23,592 23,502 23,502
R2 0.0553 0.0557 0.1196 0.1226

Panel C: Use weighted regression

The results of using weighted regression are presented in this table. Columns (1)-(2) are weighted by eastern, central and western regions, columns (3)-(4) are
weighted by city size, and columns (5)-(6) are weighted by city GDP. The t-statistics under robust standard errors are displayed in parentheses. Significance is
denoted by the symbols *, **, and *** at 10%, 5%, and 1%, respectively.

(1) (2) (3) (4) (5) (6)

NCSKEW DUVOL NCSKEW DUVOL NCSKEW DUVOL

Fintech − 0.0083*** − 0.0050*** − 0.0066*** − 0.0039** − 0.0086*** − 0.0048***

(− 3.2170) (− 2.9011) (− 2.6188) (− 2.3334) (− 3.4226) (− 2.7769)
Controls YES YES YES YES YES YES
Year fixed effects YES YES YES YES YES YES
Industry fixed YES YES YES YES YES YES
effects
N 23,592 23,592 23,592 23,592 23,592 23,592
2
R 0.0546 0.0552 0.0542 0.0547 0.0587 0.0582

(Jin and Myers, 2006). In addition, Andreou et al. (2017) suggest that an unexpected interruption in continuous earnings growth
implies a sudden disclosure of bad news. Therefore, we further examine whether FinTech development may encourage managers to
disclose bad news promptly and prevent them from manipulating earnings and hoarding bad news.
First, we test the effect of FinTech development on management disclosure behaviors in relation to bad news using three dummy
variables, namely CRASH_BREAK_STRING1, CRASH_BREAK_STRING2, and SURP_UE.15 The results reported in Columns (1) through

15
CRASH_BREAK_STRING1 is assigned to 1 if the firm experiences a stock price crash in the current year and its earnings decrease in the current
year but increased in the previous year. CRASH_BREAK_STRING2 is assigned a value of 1 if the firm’s earnings decreased in the year of the crash but
increased in the previous two years. SURP_UE is assigned a value of 1 if a firm’s windfall in year t is in the bottom decile and non-negative in year t-
1. Following Kothari et al. (2006), we calculate a firm’s windfall as the change in income before extraordinary items in years t and t-1 divided by the
market value of equity in year t-1.

6
 X. Wang et al.
Table 4
Tests of possible mechanism.
The regression results of the mechanism test are presented in this table. Columns (1) through (3) are direct tests using the logit model, where CRASH_BREAK_STRING1 is assigned a value of 1 if the firm
experienced a stock price crash in the year and the firm’s earnings decreased in the year but increased in the previous year; similarly, CRASH_BREAK_STRING2 is assigned a value of 1 if the firm’s earnings
decreased in the year of the stock price crash but increased in the previous two years. In addition, we calculate a company’s "windfall" as the change in income before extraordinary items in years t and t-1
divided by the market value of equity in year t-1. If a company’s windfall is in the bottom decile in year t and non-negative in year t-1, then SURP_UE is assigned a value of 1. Columns (4) through (8) are
indirect tests where the accrued surplus manipulation (DA) is calculated by the modified Jones model, where financial restatement (Restate) is a dummy variable that takes the value of 1 if the company
makes a financial restatement in the current year, and the information transparency indicator ASY is extracted from the liquidity ratio LR, non-liquidity ratio ILL, and return ratio ILL by referring to the
method of Bharath et al. (2009). The first principal component of the liquidity ratio ILL and the yield reversal indicator GAM are extracted to construct a comprehensive indicator of information
transparency ASY, where a larger value means lower information transparency, SYN is the degree of synchronization of stock prices and is calculated using a sub-market equally weighted average method,
the KV index was constructed by referring to Kim and Verrecchia (2001). The t-statistics under robust standard errors are displayed in parentheses. Significance is denoted by the symbols *, **, and *** at
10%, 5%, and 1%, respectively.
(1) (2) (3) (4) (5) (6) (7) (8)
CRASH_BREAK_STRING1 CRASH_BREAK_STRING2 SURP_UE DA Restate ASY SYN KV

Fintech − 0.0485** − 0.0462* − 0.0440** − 0.0011*** − 0.0219** − 0.0027*** − 0.0012** − 0.0012***

(− 2.4301) (− 1.7193) (− 2.2913) (− 7.6095) (− 2.1763) (− 3.9597) (− 1.9607) (− 3.2080)
Size 0.0900* 0.2588*** 0.3599*** 0.0044*** − 0.0705*** − 0.2129*** 0.0035*** − 0.0399***
(1.8413) (4.1733) (8.9864) (13.4374) (− 3.1197) (− 139.6261) (2.6038) (− 48.6209)
Lev − 0.5182** − 0.8430** − 0.0307 − 0.0093*** 0.3413*** 0.1720*** − 0.0801*** 0.0281***
(− 2.0867) (− 2.4105) (− 0.1425) (− 5.1423) (2.8500) (20.4353) (− 10.7272) (5.8995)
7

ROA − 3.1218*** 0.4440 − 11.2536*** 0.9939*** − 1.6250*** − 0.3321*** − 0.1312*** 0.3333***

(− 4.5950) (0.3977) (− 18.9718) (179.3795) (− 4.5009) (− 12.8710) (− 5.4005) (23.1876)
Growth − 1.4684*** − 1.7544*** − 2.6301*** − 0.0212*** 0.2239*** 0.0146*** − 0.0344*** 0.0098***
(− 6.9761) (− 5.4669) (− 14.9536) (− 28.5393) (4.7906) (4.2473) (− 10.9183) (4.8607)
Cashflow − 1.9462*** − 1.5741* − 1.0209* − 1.0246*** − 0.3357 − 0.0379** − 0.0150 0.0203*
(− 3.2729) (− 1.8332) (− 1.8974) (− 247.9715) (− 1.2052) (− 1.9631) (− 0.8948) (1.8330)
TobinQ − 0.0303 − 0.0346 − 0.3104*** − 0.0005* 0.0023 − 0.1013*** − 0.0298*** − 0.0102***
(− 0.5864) (− 0.6132) (− 4.9873) (− 1.6977) (0.1128) (− 74.1908) (− 22.5733) (− 11.7391)
INST − 0.4504** − 0.3258 − 0.9729*** 0.0041*** − 0.2798*** 0.2732*** − 0.0445*** 0.1206***
(− 2.2375) (− 1.1856) (− 5.6259) (3.0205) (− 3.0168) (43.2596) (− 7.7599) (30.9802)
ListAge − 0.3602*** 0.0029 − 0.7872*** − 0.0007 − 0.0071 − 0.0258*** 0.0196*** − 0.0518***
(− 5.7629) (0.0376) (− 13.0592) (− 1.4852) (− 0.2270) (− 12.1372) (10.2586) (− 37.5019)
G_GDP − 0.0007 0.0155 − 0.0026 − 0.0002 0.0202** − 0.0032*** 0.0006 − 0.0011***
(− 0.0376) (0.5744) (− 0.1642) (− 1.1970) (2.1154) (− 4.8525) (1.1240) (− 2.9739)
Pop 0.1494** 0.2357*** 0.0371 0.0002 − 0.0483 0.0129*** 0.0024 0.0056***

Finance Research Letters xxx (xxxx) xxx

(2.2865) (2.8501) (0.6574) (0.4710) (− 1.5759) (6.0770) (1.3261) (4.7052)
Constant − 4.7431*** − 9.7005*** − 9.8969*** − 0.0672*** 0.2909 4.7470*** 0.4866*** 1.0336***
(− 4.1173) (− 6.3370) (− 9.5933) (− 8.9301) (0.5074) (135.6091) (15.7152) (52.1615)
Year fixed effects YES YES YES YES YES YES YES YES
Industry fixed effects YES YES YES YES YES YES YES YES
N 23,553 23,160 23,372 23,067 23,568 21,633 20,736 23,277
R2 0.0794 0.0843 0.2032 0.7749 0.0336 0.6933 0.2602 0.3397
X. Wang et al. Finance Research Letters xxx (xxxx) xxx

(3) in Table 4 suggest that FinTech development can significantly reduce the risk of a tendency by management to hide bad news and
then suddenly release it in the future.
Second, we test whether FinTech development will improve earnings quality and information transparency.16 Consistent with the
prior literature, the results presented in Columns (4) – (6) show that FinTech development can significantly improve accrual quality,
reduce the likelihood of restatement, and improve information transparency. These results further support that FinTech development
can motivate management to disclose bad news as early as possible, thus improving stock price stability.
Third, we examine whether FinTech development will improve information efficiency. We measure the information efficiency of a
firm using the degree of synchronization of stock prices (SYN). A lower degree of firm-specific information will be reflected in stock
prices when there is a higher level of synchrony between stocks and the market, leading to lower information efficiency (Durnev et al.,
2003; Jin and Myers 2006; Hutton et al., 2009). The results reported in Column (7) show that FinTech development can reduce the
synchrony of stock prices, indicating higher information efficiency.
Finally, we investigate whether FinTech development will improve the quality of both mandatory and voluntary disclosures, using
an index developed by Kim and Verrecchia (2001).17 The results in Column (8) support the perspective that FinTech development
improves information quality.

4.2. Cross-sectional heterogeneity

4.2.1. Company ownership and internal control

In China, SOEs are fundamentally different from non-SOEs. Thus, it is warranted to examine whether the role of FinTech devel­
opment in reducing crash risks varies across SOEs and non-SOEs. The results in Columns (1) – (4) in Table 5 Panel A show that FinTech
development mainly reduces stock price collapse risks for non-SOEs. Our results are consistent with the notion that SOEs are strictly
regulated compared to non-SOEs. Therefore, an SOE’s management has fewer incentives to hide bad news (Jiang and Kim, 2015). As a
result, FinTech plays a less significant role in mitigating agency problems and information asymmetry for SOEs, leading to a lower
impact on crash risks.
Internal control quality is another important mechanism restraining management’s opportunistic behaviors. The severity of agency
problems and information asymmetry varies among firms with different levels of internal control quality. Accordingly, we expect that
the relationship between FinTech development and crash risk varies across firms with different degrees of internal control quality. We
divide our sample into two sub-samples based on the annual median of the internal control index (IC index).18 The results reported in
Columns (5) through (8) in Table 5 Panel A suggest that the stabilizing effect of FinTech development on stock price is significant for
firms with low-quality internal controls but insignificant for firms with relatively high-quality internal controls.

4.2.2. Information environment

Good information environments reduce information asymmetry between investors and firms (Hutton et al., 2009). Financial an­
alysts use their expertise to collect and interpret firms’ information and share it with market participants, while high analyst coverage
is positively associated with a better information environment. Therefore, we expect the impact of FinTech development on stabilizing
stock prices to be stronger among firms with less analyst coverage. The results in Panel B of Table 5 reveal that FinTech development
plays a more significant role in stabilizing stock prices for firms with less analyst coverage than those with high analyst attention and
better information environments.

4.2.3. Agency issues

We use management expense ratios (MER) and management ownership as proxies for firms’ agency problems.19 A higher MER and
lower management ownership imply the possibility of a higher degree of deviation from the interests of shareholders and greater
agency problems. The results in Panel C in Table 5 show that the effect of FinTech development on stabilizing stock prices is significant
for firms with high MER and low management ownership, while the FinTech effect is insignificant for those with low MER and high

16
Prior studies find that firms tend to engage in earnings manipulation to hide bad news (Zhu, 2016). With bad news accumulating, managers
eventually need to restate earnings to their intrinsic value because releasing bad news may increase the probability of future stock price collapse
(Kim and Zhang, 2014). Furthermore, Ertugrul et al. (2017) find that firms with high information asymmetry are usually more vulnerable to stock
price crashes due to low financial reporting quality. We use discretionary accruals from the Jones model (DA) and the likelihood of financial re­
statements as proxies for earnings quality (Restate). We measure the information transparency indicator (ASY) as extracting the first principal
components of the liquidity ratio (LR), the illiquidity ratio (ILL), and the yield reversal indicator (GAM). The larger the value of ASY, the lower the
information transparency.
17
A lower index value indicates a higher quality of information disclosure, while a higher index value signifies a lower quality of disclosure.
Effective and transparent information disclosure is crucial for investors when making informed decisions about their investments. When listed firms
provide high-quality information, investors can better assess the firm’s value and are less likely to rely on trading volume as a primary factor in their
investment decisions. On the other hand, if the quality of information disclosed is poor, investors may struggle to evaluate the investment value
accurately and rely more heavily on trading volume as a proxy for the firm’s performance.
18
We use the Diebold China Listed Companies Risk Control Evaluation Index to measure the quality of corporate internal control. The index is
derived from the construction and evaluation of the index system by setting 65 secondary indicators from the five core elements of internal control:
internal environment, risk assessment, control activities, information and communication, and internal oversight.
19
We measure MER as management expenses divided by main business income.

8
X. Wang et al. Finance Research Letters xxx (xxxx) xxx

Table 5
Tests of cross-sectional heterogeneity.
Panel A: Firm characteristics
The regression results of the impact of FinTech on the risk of stock price collapse are presented in this table. Columns (1) through (4) compare the impact of FinTech
on state-owned and non-state-owned firms, where the explained variable in columns (1) and (2) is NCSKEW and in columns (3) and (4) DUVOL; columns (5) through
(8) compare the impact of FinTech on firms with high and low internal control quality, where we define a firm as a firm with high internal control quality when its
internal control index score is higher than the median value of total assets for the corresponding year and industry; if this criterium is not met, the firm is classified as
a firm with low internal control quality, where the explained variable in columns (5) and (6) is NCSKEW and in columns (7) and (8) DUVOL. The t-statistics under
robust standard errors are displayed in parentheses. Significance is denoted by the symbols *, **, and *** at 10%, 5%, and 1%, respectively.

− 1 − 2 − 3 − 4 − 5 − 6 − 7 − 8
SOEs non-SOEs SOEs non-SOEs High IC index Low IC index High IC index Low IC index

Fintech − 0.0032 − 0.0083** − 0.0026 − 0.0046* − 0.0022 − 0.0119*** − 0.0006 − 0.0082***

(− 0.8769) (− 2.3261) (− 1.0604) (− 1.9592) (− 0.6698) (− 3.0670) (− 0.2500) (− 3.2625)
Controls YES YES YES YES YES YES YES YES
Year fixed effects YES YES YES YES YES YES YES YES
Industry fixed effects YES YES YES YES YES YES YES YES
N 10,919 12,669 10,919 12,669 12,036 11,546 12,036 11,546
R2 0.0731 0.0488 0.0738 0.0485 0.0713 0.0539 0.07 0.0549
Chow-Test 1.43*** 1.48*** 2.17*** 2.08***
(p-value) 0.0038 0.0015 0 0

Panel B: Information environment

The regression results of the impact of FinTech on the risk of stock price collapse are presented in this table. Columns (1) through (4) compare the impact of FinTech
on firms with more analyst tracking and firms with less analyst tracking, where the explained variable in columns (1) and (2) is NCSKEW and in columns (3) and (4)
DUVOL; columns (5) through (8) compare the impact of FinTech on firms with more research report tracking and firms with less research report tracking, where the
explained variable in columns (5) and (6) is NCSKEW and in columns (7) and (8) DUVOL; the grouping criteria are the number of analysts tracked and the annual
median number of research reports tracked by firms. The t-statistics under robust standard errors are displayed in parentheses. Significance is denoted by the
symbols *, **, and *** at 10%, 5%, and 1%, respectively.

− 1 − 2 − 3 − 4 − 5 − 6 − 7 − 8
High- tracking Low-tracking High- tracking Low-tracking High- reports Low-reports High- reports Low-reports

Fintech − 0.0035 − 0.0107*** − 0.0024 − 0.0058** − 0.0009 − 0.0137*** − 0.0012 − 0.0072***

(− 1.0674) (− 2.7528) (− 1.0495) (− 2.2923) (− 0.2768) (− 3.4883) (− 0.5150) (− 2.8383)
Controls YES YES YES YES YES YES YES YES
Year fixed effects YES YES YES YES YES YES YES YES
Industry fixed effects YES YES YES YES YES YES YES YES
N 11,253 12,332 11,253 12,332 11,572 12,013 11,572 12,013
R2 0.0742 0.0616 0.0759 0.0622 0.0708 0.0627 0.073 0.064
Chow-Test 4.40*** 3.97*** 4.54*** 4.15***
(p-value) 0 0 0 0

Panel C: Agency issues

The regression results of the impact of FinTech on the risk of stock price collapse are presented in this table. Columns (1) through (4) compare the impact of FinTech
on firms with high and low management expenses, where the explained variable in columns (1) and (2) is NCSKEW and in columns (3) and (4) DUVOL; columns (5)
through (8) compare the impact of FinTech on firms with high and low management ownership, where the explained variable in columns (5) and (6) is NCSKEW and
in columns (7) and (8) DUVOL; the grouping criteria are the annual median of the firms’ management expenses and management ownership. The t-statistics under
robust standard errors are displayed in parentheses. Significance is denoted by the symbols *, **, and *** at 10%, 5%, and 1%, respectively.

− 1 − 2 − 3 − 4 − 5 − 6 − 7 − 8
High-fee Low-fee High-fee Low-fee High-shareholder Low- shareholder High-shareholder Low- shareholder

Fintech − 0.0124*** − 0.001 − 0.0087*** 0.0009 − 0.005 − 0.0099*** − 0.0025 − 0.0064***

(− 3.4100) (− 0.2866) (− 3.5978) − 0.3785 (− 1.4074) (− 2.7281) (− 1.0575) (− 2.6420)
Controls YES YES YES YES YES YES YES YES
Year fixed effects YES YES YES YES YES YES YES YES
Industry fixed effects YES YES YES YES YES YES YES YES
N 11,514 12,074 11,514 12,074 11,917 11,670 11,917 11,670
R2 0.0584 0.0615 0.0576 0.0629 0.0549 0.0665 0.0573 0.0653
Chow-Test 1.67*** 1.65*** 1.90*** 1.82***
(p-value) 0 0.0001 0 0

Panel D: Industry and regional effects

The regression results of the impact of FinTech on the risk of stock price collapse are presented in this table. Columns (1) through (4) compare the impact of FinTech
on firms in highly competitive industries and firms in less competitive industries, where the explained variable in columns (1) and (2) is NCSKEW and in columns (3)
and (4) DUVOL; columns (5) through (8) compare the impact of FinTech on firms in areas with high marketization and firms with low marketization, where the
explained variable in columns (5) and (6) is NCSKEW and in Column (7) and (8) DUVOL. The grouping criteria are the annual median of the Lerner index of the
firm’s industry and the marketization index of the firm’s region. The t-statistics under robust standard errors are displayed in parentheses. Significance is denoted by
the symbols *, **, and *** at 10%, 5%, and 1%, respectively.

− 1 − 2 − 3 − 4 − 5 − 6 − 7 − 8
High- Low- High- Low- High- market Low- market High-market Low-
competition competition competition competition market

Fintech − 0.0139*** − 0.0006 − 0.0072*** − 0.0015 − 0.0179*** 0.0005 − 0.0111*** 0.0013

(continued on next page)

9
X. Wang et al. Finance Research Letters xxx (xxxx) xxx

Table 5 (continued )
Panel D: Industry and regional effects
The regression results of the impact of FinTech on the risk of stock price collapse are presented in this table. Columns (1) through (4) compare the impact of FinTech
on firms in highly competitive industries and firms in less competitive industries, where the explained variable in columns (1) and (2) is NCSKEW and in columns (3)
and (4) DUVOL; columns (5) through (8) compare the impact of FinTech on firms in areas with high marketization and firms with low marketization, where the
explained variable in columns (5) and (6) is NCSKEW and in Column (7) and (8) DUVOL. The grouping criteria are the annual median of the Lerner index of the
firm’s industry and the marketization index of the firm’s region. The t-statistics under robust standard errors are displayed in parentheses. Significance is denoted by
the symbols *, **, and *** at 10%, 5%, and 1%, respectively.

− 1 − 2 − 3 − 4 − 5 − 6 − 7 − 8
High- Low- High- Low- High- market Low- market High-market Low-
competition competition competition competition market

(− 3.6632) (− 0.1745) (− 2.8457) (− 0.6533) (− 4.4728) − 0.1372 (− 4.0986) − 0.5611

Controls YES YES YES YES YES YES YES YES
Year fixed effects YES YES YES YES YES YES YES YES
Industry fixed YES YES YES YES YES YES YES YES
effects
N 11,757 11,834 11,757 11,834 11,295 12,294 11,295 12,294
2
R 0.0566 0.066 0.0571 0.0649 0.0598 0.0578 0.0633 0.056
Chow-Test 1.97*** 1.76*** 1.25** 1.40***
(p-value) 0 0 0.0499 0.0056

management ownership. These results show that FinTech development can reduce agency costs by alleviating the agency problem
between shareholders and managers, thus suppressing collapse risks.

4.2.4. Industry and regional effects

Firms in competitive industries might hide negative information, leading to severe information asymmetry and inducing aggressive
behaviors in management due to external pressure (Verrecchia, 1983). We use the Lerner index as a proxy for industry competition and
divide our sample based on the annual median value of the index. The results presented in Columns (1) through (4) of Panel D suggest
that FinTech development is more capable of stabilizing stock prices for firms in more competitive industries.
In addition, the degree of marketization indicates the level of regional economic development and competition within an industry.
We divide our sample based on the annual median values of the marketization index of a firm’s region. The results show that co­
efficients on Fintech are significantly larger for firms in high-marketization regions than those in low-marketization regions. In
particular, the coefficients on Fintech are insignificant for firms located in regions with low-marketization, with a magnitude close to
zero.

5. Conclusion

This study examines the impact of FinTech on stock price crash risks, and finds that FinTech can suppress these risks by alleviating
the information asymmetry and constraining managerial bad-news hoarding, thereby improving information environments. The cross-
sectional heterogeneity tests find that the effects are more pronounced in non-SOEs, firms with low internal control quality and poor
external information environments, firms in highly competitive industries and regions with high marketization. These findings support
the positive role of FinTech in stabilizing the capital market and provide novel evidence of its development in accelerating the
empowerment of traditional financial institutions and promoting economic development.

CRediT authorship contribution statement

Xinyue Wang: Methodology, Data curation, Formal analysis, Writing – original draft. Yuqiang Cao: Methodology, Data curation,
Supervision, Project administration, Writing – original draft. Zhuoan Feng: Methodology, Data curation, Project administration,
Writing – original draft. Meiting Lu: Conceptualization, Methodology, Supervision, Project administration, Writing – review &
editing. Yaowen Shan: Conceptualization, Methodology, Supervision, Project administration, Writing – review & editing.

Data availability

Data will be made available on request.

Acknowledgements

We appreciate the constructive suggestions from Martin Bugeja, Chris Patel, and Grant Richardson. We also thank the seminar
participants at Guangdong University of Foreign Studies, Macquarie University and the University of Technology Sydney. Yuqiang Cao
acknowledges the financial support from the National Natural Science Foundation of China (Grant Number:72203048), Humanities
and Social Science Fund of Ministry of Education of China (Grant Number: 21YJC790004), Guangdong Basic and Applied Basic
Research Foundation (Grant Number: 2022A1515110082, 2021A151511022, 2022A1515110547, 2021A1515110943), and

10
X. Wang et al. Finance Research Letters xxx (xxxx) xxx

Guangdong Planning Office of Philosophy and Social Science (Grant Number: GD20XGL24, GDZICG124, GD22XYJ06). Yaowen Shan
acknowledges the financial support from the Australian Research Council (Grant Number: DP210101354).

Appendix. Definitions of variables

Variables Description

Dependent variables
Negative return skewness coefficient
(NCSKEW)
Earnings up/down ratio (DUVOL)
The negative skewness of firm-specific weekly returns over the fiscal year, where the firm-specific weekly return is
where the residual estimated the expanded market model regression following Hutton et al. (2009) and Kim et al.
(2011)
The log of the ratio of the standard deviations of down-week to up-week firm-specific weekly returns, where the firm-
specific weekly return is where the residual estimated the expanded market model regression following Hutton et al.
(2009) and Kim et al. (2011)

Independent variables
Financial technology development level The natural logarithm of the number of local FinTech firms plus one
(Fintech)
Firm size (Size) The natural logarithm of market capitalization
Firm age (Age) The natural logarithm of the number of years since the establishment of the business
Leverage (Lev) The ratio of total debt over total assets
Return on assets (ROA) Net profits divided by total assets
Operating income growth rate (Growth) Difference between current year’s operating income and prior year’s operating income divided by prior year’s
operating income
Operating cash flow (Cashflow) Net cash flow from operating activities divided by total assets
Corporate social wealth creativity (TobinQ) (Market value of outstanding shares + number of non-marketable shares × net assets per share + book value of
liabilities)/total assets
Proportion of shares held by institutional Total number of shares held by institutional investors divided by the outstanding share capital
investors (INST)
Local municipality economic development GDP growth rate at the local and municipal level
level (G_GDP)
Local municipality size (Pop) The natural logarithm of the total population at the local and municipal levels

References

Andreou, P.C., Louca, C., Petrou, A.P., 2017. CEO age and stock price crash risk. Rev. Financ. 21 (3), 1287–1325. https://doi.org/10.1093/rof/rfw056.
Bartik, T., 2006. How Do the Effects of Local Growth On Employment Rates Vary With Initial Labor Market Conditions? https://doi.org/10.2139/ssrn.1372814.
Berger, A.N., 2003. The economic effects of technological progress: evidence from the banking industry. J. Money, Credit Bank. 141–176. http://www.jstor.org/
stable/3649852.
Berg, T., Burg, V., Gombović, A., Puri, M., 2020. On the rise of fintechs: credit scoring using digital footprints. Rev. Financ. Stud. 33 (7), 2845–2897. https://doi.org/
10.1093/rfs/hhz099.
Bharath, S.T., Pasquariello, P., Wu, G., 2009. Does asymmetric information drive capital structure decisions? Rev. Financ. Stud. 22 (8), 3211–3243. https://doi.org/
10.1093/rfs/hhn076.
Chen, M.A., Wu, Q., Yang, B., 2019. How valuable is FinTech innovation? Rev. Financ. Stud. 32 (5), 2062–2106. https://doi.org/10.1093/rfs/hhy130.
Chen, J., Zhao, D., Liu, X., Xu, C., Liu, L., 2022. Home sweet home: do local CEOs curb stock price crash risk? Finance Res. Lett. 50, 103314 https://doi.org/10.1016/j.
frl.2022.103314.
Cheng, B., Ioannou, I., Serafeim, G., 2014. Corporate social responsibility and access to finance. Strategic Manag. J. 35 (1), 1–23. https://doi.org/10.1002/smj.2131.
Cheng, Q., Du, F., Wang, X., Wang, Y., 2016. Seeing is believing: analysts’ corporate site visits. Rev. Account. Stud. 21 (4), 1245–1286. https://doi.org/10.1007/
s11142-016-9368-9.
Daud, S.N.M., Khalid, A., Azman-Saini, W.N.W., 2022. FinTech and financial stability: threat or opportunity? Finance Res. Lett. 47, 102667 https://doi.org/10.1016/
j.frl.2021.102667.
deHaan, E., de Kok, T., Matsumoto, D.A., Rodriguez-Vazquez, E., 2022. How resilient are firms’ financial reporting processes. Manag. Sci. forthcoming.
Ding, N., Gu, L., Peng, Y., 2022. Fintech, financial constraints and innovation: evidence from China. J. Corp. Finance 73, 102194. https://doi.org/10.1016/j.
jcorpfin.2022.102194.
Durnev, A., Morck, R., Yeung, B., Zarowin, P., 2003. Does greater firm-specific return variation mean more or less informed stock pricing? J. Account. Res. 41 (5),
797–836. https://doi.org/10.1046/j.1475-679X.2003.00124.x.
Ertugrul, M., Lei, J., Qiu, J., Wan, C., 2017. Annual report readability, tone ambiguity, and the cost of borrowing. J. Financ. Quant. Anal. 52 (2), 811–836. https://doi.
org/10.1017/S0022109017000187.
Fisher, R.A., 1935. The fiducial argument in statistical inference. Ann. Eugen. 6 (4), 391–398. https://doi.org/10.1111/j.1469-1809.1935.tb02120.x.
Fuster, A., Plosser, M., Schnabl, P., Vickery, J., 2019. The role of technology in mortgage lending. Rev. Financ. Stud. 32 (5), 1854–1899. https://doi.org/10.1093/rfs/
hhz018.
Gong, X., Zhang, W., Wang, J., Wang, C., 2022. Investor sentiment and stock volatility: new evidence. Int. Rev. Financ. Anal. 80, 102028 https://doi.org/10.1016/j.
irfa.2022.102028.
Grennan, J., Michaely, R., 2021. Fintechs and the market for financial analysis. J. Financ. Quant. Anal. 56 (6), 1877–1907. https://doi.org/10.1017/
S0022109020000721.
Guo, Feng, Wang, Jingyi, Wang, Fang, Kong, Tao, Zhang, Xun, Cheng, Zhiyun, 2020. Measuring the development of digital inclusive finance in China: index
compilation and spatial characteristics. China Econ. Q. (04), 1401–1418. https://doi.org/10.13821/j.cnki.ceq.2020.03.12. Chinese.
Hodula, M., 2023. Fintech credit, big tech credit and income inequality. Finance Res. Lett. 51, 103387 https://doi.org/10.1016/j.frl.2022.103387.
Hua, X., Huang, Y., 2021. Understanding China’s fintech sector: development, impacts and risks. Eur. J. Finance 27 (4–5), 321–333. https://doi.org/10.1080/
1351847X.2020.1811131.
Huang, Y., Lin, C., Sheng, Z., Wei, L., 2018. FinTech Credit and Service Quality. Geneva Financial Research Institute, Geneva. Working Papers.

11
X. Wang et al. Finance Research Letters xxx (xxxx) xxx

Hutton, A.P., Marcus, A.J., Tehranian, H., 2009. Opaque financial reports, R2, and crash risk. J. Financ. Econ. 94 (1), 67–86. https://doi.org/10.1016/j.
jfineco.2008.10.003.
Jiang, F., Kim, K.A., 2015. Corporate governance in China: a modern perspective. J. Corp. Finance 32, 190–216. https://doi.org/10.1016/j.jcorpfin.2014.10.010.
Jin, L., Myers, S.C., 2006. R2 around the world: new theory and new tests. J. Financ. Econ. 79 (2), 257–292. https://doi.org/10.1016/j.jfineco.2004.11.003.
Jung, H., Song, C.K., 2023. Managerial perspectives on climate change and stock price crash risk. Finance Res. Lett. 51, 103410 https://doi.org/10.1016/j.
frl.2022.103410.
Kanga, D., Oughton, C., Harris, L., Murinde, V., 2022. The diffusion of fintech, financial inclusion and income per capita. Eur. J. Finance 28 (1), 108–136. https://doi.
org/10.1080/1351847X.2021.1945646.
Kim, J.B., Li, Y., Zhang, L., 2011. Corporate tax avoidance and stock price crash risk: firm-level analysis. J. Financ. Econ. 100 (3), 639–662. https://doi.org/10.1016/j.
jfineco.2010.07.007.
Kim, O., Verrecchia, R.E., 2001. The relation among disclosure, returns, and trading volume information. Account. Rev. 76 (4), 633–654. https://doi.org/10.2308/
accr.2001.76.4.633.
Kim, J.B., Zhang, L., 2014. Financial reporting opacity and expected crash risk: evidence from implied volatility smirks. Contemp. Account. Res. 31 (3), 851–875.
https://doi.org/10.1111/1911-3846.12048.
Kim, J.B., Zhang, L., 2016. Accounting conservatism and stock price crash risk: firm-level evidence. Contemp. Account. Res. 33 (1), 412–441. https://doi.org/
10.1111/1911-3846.12112.
Kothari, S.P., Lewellen, J., Warner, J.B., 2006. Stock returns, aggregate earnings surprises, and behavioral finance. J. Financ. Econ. 79 (3), 537–568. https://doi.org/
10.1016/j.jfineco.2004.06.016.
Lapavitsas, C., Santos, Dos, P, L., 2008. Globalization and contemporary banking: on the impact of new technology. Contrib. Polit. Econ. 27 (1), 31–56. https://doi.
org/10.1093/cpe/bzn005.
Li, J., Wu, Y., Xiao, J.J., 2020. The impact of digital finance on household consumption: evidence from China. Econ. Model. 86, 317–326. https://doi.org/10.1016/j.
econmod.2019.09.027.
Li, D., Xing, L., Zhao, Y., 2022. Does extended auditor disclosure deter managerial bad-news hoarding? Evidence from crash risk. J. Corp. Finance 76, 102256. https://
doi.org/10.1016/j.jcorpfin.2022.102256.
Lin, M., Prabhala, N.R., Viswanathan, S., 2013. Judging borrowers by the company they keep: friendship networks and information asymmetry in online peer-to-peer
lending. Manag. Sci. 59 (1), 17–35. https://doi.org/10.1287/mnsc.1120.1560.
Ludbrook, J., Dudley, H., 1998. Why permutation tests are superior to t and F tests in biomedical research. Am. Stat. 52 (2), 127–132. https://doi.org/10.1080/
00031305.1998.10480551.
Ma, Y., 2020. Shareholder litigation and the information content of management voluntary disclosure. Account. Rev. 95 (5), 279–298. https://doi.org/10.2308/accr-
52651.
Malmendier, U., Tate, G., Yan, J., 2011. Overconfidence and early-life experiences: the effect of managerial traits on corporate financial policies. J. Finance 66 (5),
1687–1733. https://doi.org/10.1111/j.1540-6261.2011.01685.x.
Mocetti, S., Pagnini, M., Sette, E., 2017. Information technology and banking organization. J. Financ. Services Res. 51 (3), 313–338. https://doi.org/10.1007/s10693-
016-0244-3.
Ntwiga, D.B., 2020. Technical efficiency in the Kenyan banking sector: influence of fintech and banks collaboration. J. Finance Econ. 8 (1), 13–20. https://doi.org/
10.12691/jfe-8-1-3.
Oster, E., 2019. Unobservable selection and coefficient stability: theory and evidence. J. Bus. Econ. Stat. 37 (2), 187–204. https://doi.org/10.1080/
07350015.2016.1227711.
Sheng, T., 2021. The effect of fintech on banks’ credit provision to SMEs: evidence from China. Finance Res. Lett. 39, 101558 https://doi.org/10.1016/j.
frl.2020.101558.
Verrecchia, R.E., 1983. Discretionary disclosure. J. Account. Econ. 5, 179–194. https://doi.org/10.1016/0165-4101(83)90011-3.
Wei, X.J., Xia, W.L., Sun, T.T., 2014. Study on investor sentiment measurement of a-share market based on BW model. Manag. Obs. 33, 71–73. Chinese.
Wei, L., Zhang, Y., 2023. Nonfinancial indicators in identifying stock price crash risk. Finance Res. Lett. 52, 103513 https://doi.org/10.1016/j.frl.2022.103513.
Wu, K., Fu, Y., Kong, D., 2022. Does the digital transformation of enterprises affect stock price crash risk? Finance Res. Lett. 48, 102888 https://doi.org/10.1016/j.
frl.2022.102888.
Xu, N., Li, X., Yuan, Q., Chan, K.C., 2014. Excess perks and stock price crash risk: evidence from China. J. Corp. Finance 25, 419–434. https://doi.org/10.1016/j.
jcorpfin.2014.01.006.
Yi, Z.G., Mao, N., 2009. Research on investor sentiment measurement in Chinese stock market: construction of CICSI. Financ. Res. (in Chinese) 11, 174–184.
Zhu, C., 2019. Big data as a governance mechanism. Rev. Financ. Stud. 32 (5), 2021–2061. https://doi.org/10.1093/rfs/hhy081.
Zhu, W., 2016. Accruals and price crashes. Rev. Account. Stud. 21 (2), 349–399. https://doi.org/10.1007/s11142-016-9355-1.

12