Can Fintech Alleviate the Financing Constraints of Enterprises?—Evidence from the Chinese Securities Market
Round 1
Reviewer 1 Report
1) The efforts put in by the authors are evident, but coincidentally the research paper title and data period seem very similar to recently published paper article: FinTech and financing constraints of enterprises: Evidence from China - ScienceDirect
2) The study period needs to be updated to make a meaningful impact on the Readers/Researchers
3) The research methodology could be explained explicitly for better understanding of the readers.
4) The research findings/conclusions need to be compared and supported with earlier similar studies findings
Author Response
Response to Reviewer 1Comments
Point 1: The efforts put in by the authors are evident, but coincidentally the research paper title and data period seem very similar to recently published paper article: Fin-Tech and financing constraints of enterprises: Evidence from China - Science Direct.
Response 1:
We are very grateful to your comments for the manuscript.With regard to your comments of “the research paper title and data period seem very similar to recently published paper article: FinTech and financing constraints of enterprises: Evidence from China”, We carefully read the paper "FinTech and financing constraints of enterprises: Evidence from China" by Junyan Guo.etc.We have absorbed the beneficial part of the research by Junyan Guo and find there are some differences.
First, although we have studied the relationship between Fintech and corporate financing constraints, the research of intermediary mechanism is not the same. The mechanism analysis of our paper is as follows: Fintech alleviates corporate financing constraints by alleviating the information asymmetry between funds’ supply and demand and reducing financing costs. While, the research of intermediary mechanism by Junyan Guo is as follows: The FinTech is expected to improve the financial market financing level and the competitive degree of commercial banks, which may give more enterprises the opportunity to obtain more funds.
Secondly，the data period is 2011-2018，The main variables in our paper use data at the municipal level，while the research by Junyan Guo uses provincial date.
Point 2: The study period needs to be updated to make a meaningful impact on the Readers/Researchers
Response 2:
To test the hypotheses of our study, we used the A-share enterprises listed in Shanghai and Shenzhen A-share stock exchanges from 2011 to 2018 as study sample, matched with Fin-Tech data to build a data-set.
It is worthy that Fin-Tech data are obtained from the PKU-FinTech Inclusive Index of the Peking University Digital Finance Research Center.Fin-Tech index is a staged data that measures the development level of financial technology in various regions. Recently, the Peking University Digital Finance Research Center updated the Fin-Tech index from 2019 to 2020. However, in order to avoid the endogenous and heterogeneous problems of the index, our paper uses a consistent index calculation method. Therefore, we only use relatively continuous data from 2011-2018. This also facilitates the comparative analysis between our study and existing studies, and enriches existing studies.
Point 3: The research methodology could be explained explicitly for better understanding of the readers.
Response 3:
Thanks to the reviewer's emphasis on the research method of this paper, this paper has improved "3 Materials and Methods.
First of all, the data source used in the research has been modified and explained. The specific modifications can be seen in the "3.1 Data Source" section of the paper.（To test above hypotheses, we focused on data from China. We used the A-share enterprises listed in Shanghai and Shenzhen A-share stock exchanges from 2011 to 2018 as study sample, matched them with Fin-Tech data to build a sample data-set. Specifically, the enterprise financial data and involved in the study are from the CSMAR and RESSET database, Fin-Tech data are obtained from the PKU-FinTech Inclusive Index of the Peking University Digital Finance Research Center, and the regional level data are from the China Urban Statistical Yearbook. We cleaned the original data by excluding: (1) banks, securities, insurance, and other financial companies; (2) ST shares,*ST shares, and stocks that were delisted during the sample period; (3) The continuous variables were shrunk by 1% quantile on both sides to avoid the influence of abnormal value "noise", and 16,282 sample observations were finally obtained.）
Secondly，in order to test whether Fin-tech alleviates corporate financing constraints, the Econometric model, Dependent Variable, Independent Variable and Mediators used in this paper have been modified and explained in detail. The specific modifications can be seen in the "3.2 Models" section of the paper.（The Dependent Variable of this paper is Financing Constraints: Based on the fact that the SA index has the advantages of strong exogenousness and the stable measurement of the obtained variables, and has been widely used in the field of domestic and foreign corporate financing constraints,we use the SA Index as an estimate of corporate Financing Constraints to consistent with the mainstream literature. The Independent Variable of this paper is Fin-Tech: Fin-Tech is a multi-level indicator system that is based on real data. It relies on Ant Financial’s digital financial big data at the micro-user level, which can effectively fit the reality of China’s financial technology development.）
Point 4: The research findings/conclusions need to be compared and supported with earlier similar studies findings
Response 4:
With regard to your suggestion of "The research findings/conclusions need to be compared and supported with earlier similar studies findings", the "2.4 literature gap" part is added to the literature review in Chapter 2. The specific modifications are as follows:
There are three differences that distinguishes our research from other studies on Fin-tech and corporate financing constraints. Compared with the existing literature, the marginal contribution of this paper lies in: First, the relationship between Fin-tech and traditional financial systems can be complicated, especially in developing economies, so we focus on China and expand research about developing economies; Second, the existing literature on the information asymmetry in capital market is mostly seen in experience analysis [7]-[8].This paper uses the research of financial market micro-structure for reference[9], and uses the daily frequency trading data of the securities market to construct the information asymmetry index between funds supply and demand.Besides, the intermediary mechanism identification of information asymmetry and financing cost enriches the research on corporate financing constraints; Thirdly, commercial credit and bank loans are the two main external financing methods for enterprises. The existing literature on the interaction between Fin-tech development and commercial credit and bank loans is still lacking. This paper analyzes the impact of the Fin-tech on corporate debt financing (mainly including commercial credit and bank credit) under the internal control quality of enterprise heterogeneity, as well as the alternative relationship between the two debt financing methods.
Author Response File: 
Author Response.pdf
Reviewer 2 Report
Title: Can Fin-tech alleviate the financing constraints of enterprises? Evidence from the Chinese Securities Market
After reviewing this article, I think it is potential for publication but the authors should revise as comments below:
- In the introduction, the authors should emphasize the motivation of the research. Why is this topic important to do research in China?
- In the literature review, the studies should update recent studies relating to your topic. I suggest the authors review and cite some recent studies such as Nguyen (2022); Luo et al. (2022); Dang et al (2021); … (see reference).
- Hypotheses should be expressed in a short sentence, not as a paragraph.
- In section 3.1, the authors must explain why the data start in 2011 and end in 2018, why did you not update the data?
- To select control variables, the author must explain based on the theory or previous studies, therefore, the authors should review and cite previous studies.
- In the conclusion, the authors need to present research limitations
- There are some typos and grammatical errors, you must check it again carefully.
References
Dang, V. C et al. (2021). Internal corporate governance and stock price crash risk: evidence from Vietnam. Journal of Sustainable Finance & Investment, 1-18. doi:10.1080/20430795.2021.2006128
Luo, S., Sun, Y., & Zhou, R. (2022). Can fintech innovation promote household consumption? Evidence from China family panel studies. International Review of Financial Analysis, 82, 102137.
Nguyen, Q. K. (2022). The Effect of FinTech Development on Financial Stability in an Emerging Market: The Role of Market Discipline. Research in Globalization, 100105.
Author Response
Response to Reviewer 2 Comments
Point 1: In the introduction, the authors should emphasize the motivation of the research. Why is this topic important to do research in China?
Response 1:
We are very grateful to your comments for the manuscript.With regard to your comments of“the authors should emphasize the motivation of the research. Why is this topic important to do research in China?”.The motivation of the research is added to the introduction in Chapter 1. The specific modifications are as follows:
China’s economic development over the last quarter century has been phenomenal, making it the world’s second-largest economy (World Bank, 2022). At the same time, Fin-tech in China has made great progress and has had a great influence in the world (Huang Yiping, 2018).Ant Financial Services, WeBank, JD Finance and other leading financial technology enterprises rank the world's leading position in the fields of mobile payment, credit and investment. In 2019, the transaction scale of China's mobile payment market has exceeded 200 trillion yuan. Among them, WeBank directly puts in and connects the transaction information such as capital flow and information flow of small and medium-sized enterprises through relevant modules, bypasses the traditional financial institutions to capture key information from core enterprises, and provides services such as cash management, payment and settlement, and credit support. By 2020, WeBank has established a docking and cooperation network with more than 200 core enterprises in the supply chain, providing nearly 65 billion yuan of financing support for more than 100000 small and micro enterprises in the upstream and downstream, increasing the financing limit by nearly 70% and reducing the financing cost by nearly 15%.
Fin-Tech is the integration of "finance" and "technology" (Gomber, 2017). The advantages of Internet and big data technology applied to financial services such as mobile payment, digital insurance, investment and information lending are obvious. Many studies have shown that emerging technologies have changed financial services by making transactions cheaper, more convenient and safer (Zhu, 2019; Foster, 2019). However, some studies believe that the promotion of Fin-Tech in developed financial markets will increase the vulnerability of existing financial institutions and destroy their stability. Fin-Tech can be regarded as the direct competitor of traditional financial institutions (Kowalewski, 2022). Fin-tech can enjoy the opportunity of rapid development. Only when the existing or traditional financial system is underdeveloped can it affect enterprise financing, especially in most developing countries. Therefore, as mentioned above, especially in developing economies such as China, the relationship between Fin-tech and traditional financial systems can be complicated.
Point 2: In the literature review, the studies should update recent studies relating to your topic. I suggest the authors review and cite some recent studies such as Nguyen (2022); Luo et al. (2022); Dang et al (2021); … (see reference).
Response 2:
We are very grateful to you for providing useful documents for this article. This paper cites these documents in the literature review "2.1 The logic relationship of Fin-tech and corporate financing constraints" and the introduction section, further enriching the theoretical basis of the article.
Point 3: Hypotheses should be expressed in a short sentence, not as a paragraph.
Response 3:
Based on the theoretical basis of this paper, we simplified the research hypothesis to determine the research direction of the relationship between Fintech and corporate financing constraints, which also helps readers better grasp the research content of this paper.
Point 4: In section 3.1, the authors must explain why the data start in 2011 and end in 2018, why did you not update the data?
Response 4:
To test the hypotheses of our study, we used the A-share enterprises listed in Shanghai and Shenzhen A-share stock exchanges from 2011 to 2018 as study sample, matched with Fin-Tech data to build a data-set.
It is worthy that Fin-Tech data are obtained from the PKU-FinTech Inclusive Index of the Peking University Digital Finance Research Center.Fin-Tech index is a staged data that measures the development level of financial technology in various regions. Recently, the Peking University Digital Finance Research Center updated the Fin-Tech index from 2019 to 2020. However, in order to avoid the endogenous and heterogeneous problems of the index, our paper uses a consistent index calculation method. Therefore, we only use relatively continuous data from 2011-2018. This also facilitates the comparative analysis between our study and existing studies, and enriches existing studies.
Point 5: To select control variables, the author must explain based on the theory or previous studies, therefore, the authors should review and cite previous studies.
Response 5:
We are very grateful to your suggestions on the selection of control variables. Our paper previously ignored the analysis of control variables based on previous research. Therefore, we read relevant literature and added to the “3.3.4 Control variables”.We include a number of control variables which are likely to impact the dependent variable. Because the formation of enterprises financing constraints are inconsistent, this paper follows the existing research to control the relevant variables of corporate governance and regional economic development which influence enterprise financing environment.
Point 6: In the conclusion, the authors need to present research limitations
Response 6:
With regard to your suggestion of“In the conclusion, the authors need to present research limitations”. The “7.2. limitations” part is added to the Chapter 7. The specific modifications are as follows:
However, this research has some limitations.First, we use the data of listed companies to analyze the financing constraints. However, the financing constraints may also exist in non-listed companies, so we should expand the research perspective to non-listed companies in the future to verify the robustness of the research conclusions.Second, the sample of this study is from one single country, and future studies could extend the study to more countries, especially developing countries.Finally, the enterprise financing constraints are not only due to the problems of the existing financial system, so the existing model can incorporate other exogenous variables (such as enterprise project risk, industry type, accounting system).
Point 7: There are some typos and grammatical errors, you must check it again carefully.
Response 7:
We are very grateful to your advise about grammatical errors existed in our study. As suggested by the reviewer, we have carefully checked the paper.
Author Response File: Author Response.pdf
Reviewer 3 Report
The formulation of the hypotheses is so vague that the reader cannot actually understand what they refer to. For example: "s H1: Digital technology empowers financial institutions to provide a realistic solution for the problem of corporate financing constraints, and the development of Fin-tech has effectively alleviated the dilemma of corporate financing constraints." -- What does "realistic" mean"? What "dilemma" is that? What does it mean "to alleviate the dilemma"? And whose dilemma is it?
The Literature review has very few sources. It seems like the paragraphs are the opinions of the authors, and this is not scientific. For example, the paragraphs on lines 179-198 have no citations. The paragraph on lines 117-130 does not have any citation. This is not acceptable for an academic paper. All in all, the literature review does not communicate much and does not support the hypotheses.
The model uses the method for calculating the financial constraint from Hadlock & Pierce (2010) with a formula derived on US data. There is absolutely no evidence that this formulat is applicable to Chinese companies. The main dependent variable is not at the company level, but at the city level. The asymmetry variable "adopts Yu Wei's (2012) strategy to identify the degree of information asymmetry". There is no citation of Yu Wei. Also, on line 377, "Using the research of Lu Zhengfei for reference [31], we use "the proportion of total liabilities in total assets" to measure the level of enterprise leverage". The research of Zhengfei could not be found online. Therefore, the methodology is not supported by any academic sources.
Overall, there are numerous tables, but it is not clear what the authors are trying to prove. In each section, we have other variables, and other groupings, and other estimation methods, which are not connected to the previous sections. For examples, we get to "Table 7. Heterogeneity analysis: corporate attributes and plate types". What are plate types? The table includes "mainboard Non-motherboard". This is totally absurd. "Mainboard" and "motherboard" do not appear in the rest of the text. This table seems pasted from somewhere else. The entire paper seems like an exercise in datamining, with no clear idea and with an erroneous model.
Author Response
Response to Reviewer 3 Comments
Point 1: The formulation of the hypotheses is so vague that the reader cannot actually understand what they refer to. For example: "s H1: Digital technology empowers financial institutions to provide a realistic solution for the problem of corporate financing constraints, and the development of Fin-tech has effectively alleviated the dilemma of corporate financing constraints." -- What does "realistic" mean"? What "dilemma" is that? What does it mean "to alleviate the dilemma"? And whose dilemma is it?
Response 1:
We are very grateful to your comments for the manuscript.With regard to your comments of “The formulation of the hypotheses is so vague”，we simplified the research hypothesis to determine the research direction of the relationship between Fin-tech and corporate financing constraints, which also helps readers better grasp the research content of this paper. Specifically，"realistic" means that the financing constraints of small and medium-sized enterprises(SMEs) have not been effectively solved for a long time. The development of financial technology has provided an effective solution to this problem;"dilemma" means that small and medium-sized enterprises(SMEs) are vulnerable to credit discrimination by financial institutions, and it is difficult to obtain the funds needed for enterprise operation, which seriously weakens the competitiveness of enterprises;"alleviate the dilemma" means that it is difficult for small and medium-sized enterprises to obtain the funds needed for business operation. Financial technology provides a solution to this problem.
Point 2: The Literature review has very few sources. It seems like the paragraphs are the opinions of the authors, and this is not scientific. For example, the paragraphs on lines 179-198 have no citations. The paragraph on lines 117-130 does not have any citation. This is not acceptable for an academic paper. All in all, the literature review does not communicate much and does not support the hypotheses.
Response 2:
As suggested by the reviewer, this paper cites more relative literatures in the “literature review” and the “introduction” section, further enriching the theoretical basis of the study and supporting research hypotheses. Specifically, these literatures include the influencing factors of enterprise financing constraints, the impact of big data technology on the financial system, and the advantages and disadvantages of financial technology.
Point 3: The model uses the method for calculating the financial constraint from Hadlock & Pierce (2010) with a formula derived on US data. There is absolutely no evidence that this formulat is applicable to Chinese companies. The main dependent variable is not at the company level, but at the city level. The asymmetry variable "adopts Yu Wei's (2012) strategy to identify the degree of information asymmetry". There is no citation of Yu Wei. Also, on line 377, "Using the research of Lu Zhengfei for reference [31], we use "the proportion of total liabilities in total assets" to measure the level of enterprise leverage". The research of Zhengfei could not be found online. Therefore, the methodology is not supported by any academic sources.
Response 3:
First, we are very grateful to your comments for the method of calculating the financial constraint.After reading the relevant literature on corporate financing constraints and carefully considering the suggestions given by the reviewer, it is found that the indicators for measuring corporate financing constraints include KZ index(Kaplan and Zingales,1997), WW index (Whited,2006) and SA index(Hadlock & Pierce,2010). Based on the fact that the SA index has the advantages of strong exogenousness and the stable measurement of the obtained variables, and has been widely used in the field of domestic and foreign corporate financing constraints,we use the SA Index as an estimate of corporate Financing Constraints to consistent with the mainstream literature.In addition,the calculation method of SA index is also specified in the “3.3.1. Dependent Variable: Financing Constraints(FC)” part.
Secondly, with regard to your comments of “There is no citation of Yu Wei about the asymmetry variable” and “The research of Zhengfei could not be found online”, our study have timely made a literature supplement and modification.
Point 4: Overall, there are numerous tables, but it is not clear what the authors are trying to prove. In each section, we have other variables, and other groupings, and other estimation methods, which are not connected to the previous sections. For examples, we get to "Table 7. Heterogeneity analysis: corporate attributes and plate types". What are plate types? The table includes "mainboard Non-motherboard". This is totally absurd. "Mainboard" and "motherboard" do not appear in the rest of the text. This table seems pasted from somewhere else. The entire paper seems like an exercise in datamining, with no clear idea and with an erroneous model.
Response 4:
We are very grateful to your suggestions “there are numerous tables, but it is not clear what the authors are trying to prove”.We did neglect the language expression of each empirical research part.Thus,We have optimized the tables and corresponding language descriptions obtained from each econometric model so that readers can better understand the main contents of each part of this study. Specific modifications can be seen in the "4. Results" section of the article.
Afterwards, In the analysis of heterogeneity grouping, we have neglected to describe the stock market segment. Because characteristics of enterprises in different listed sectors are quite different and different stock market segment means that listed companies have different capital scale, profitability and ability to obtain sufficient or excess financing cash. Specifically, China's main-board is the main venue for securities issuance, listing and trading, including Shenzhen Stock Exchange and Shanghai Stock Exchange. The main-board market has higher requirements for the issuer's business term, capital stock size, profitability and minimum market value. Most listed companies in the main-board are large mature enterprises with large capital scale and stable profitability.The non-main board market refers to the small and medium-sized board market and the growth enterprise market, with relatively low requirements for issuers.
Author Response File: Author Response.pdf
Round 2
Reviewer 1 Report
Your paper is coherent, well-organized, and very informative.
Author Response
We are very grateful for your time and effort spent in reviewing our manuscript and thank you again for your advise.
Reviewer 2 Report
This version is better and can be published
Author Response
We are very grateful for your time and effort spent in reviewing our manuscript and thank you again for your advise.
Reviewer 3 Report
The methodological aspects have been improved, but the quality of the communication is very low and almost imcomprehensible. This has not improved from the previous version.
For example: "to solve the trust problem of both parties to the transaction, to reduce the financing threshold and financial success Ben is of great benefit." (245-246)
The literature review in the first half of the paper has not improved. The authors have added some citations, but it is clear that these do not match the text.
Overall, the quality of this manuscript is still low, as indicated in my previous review.
Author Response
Dear reviewer,
We are very grateful for your time and effort spent in reviewing our manuscript. For the purpose of improving the study, we have carefully addressed your suggestions as follows. Changes highlighted in red have been made accordingly in the revised manuscript.
(1)The unclear sentence has been revised and highlighted in red in the revised manuscript.
(2)With regard to“the literature review in the first half of the paper needs to be improved”,we have carefully added some citations that related to our research to literature review .
(3)Other sentence revisions of the manuscript are marked up so that changes can be easily viewed, including: Introduction、Literature review、Results、Mechanism Test.
