2.1 Literature review

The research on the development of digital finance on corporate leverage ratio has been deepening since Fisher [31] constructed the debt-deflation theory, which has become the focus of discussions in the field of macroeconomics and corporate finance at the macro level. Furthermore, many scholars conducted in their prior studies on the economic effects of digital finance specifically focused on macro and micro-economic perspectives [13, 14]. In addition, some studies empirically analyzed the impact of poverty reduction, such as Li et al [19], and Das and Chatterjee [32]. Digital finance inclusive and digital growth [33]. For example, some researchers have empirically analyzed digital finance in the corporate banking sector [34], corporate innovation [35], financial risk [23], financial stability [36], and financial innovation [22]. From the perspective of business evolution, digital finance development has enhanced competition among the financial sectors [37]. However, digital technology in the financial industry can bring financial risks [23].

From a business perspective, scholars also incorporated the economic benefits of digital finance on financial development into their studies, analysed the correlation between digital finance and financial inclusion, and identified economic indicators such as digital finance relations and financial stability [38], financial efficiency [39], corporate financial fraud [4], and financial distress [21]. Furthermore, some research scholars significantly clarify the benefits of digital finance in the context of social and environmental perspectives, such as corporate ESG [20, 40] analyzed the benefits of digital finance on carbon emissions and clarified that the impact of digital finance can significantly reduce carbon emissions in specific sectors. However, few studies have been analyzed on microeconomic indicators [41]. Few researches have been conducted on household consumption [18], and few studies have been examined from the perspective of digital finance on corporate innovation [41, 42]. In addition, few scholars address the impact of digital finance from the perspective of corporate financial constraint, efficiency, and performance [28, 43]; beyond rare studies have focused on digital finance on the financial efficiency of firms.

On the other hand, most of the latest studies empirically conducted by different scholars on digital financial development from the perspective of enterprises’ financial control, such as Sun et al [4], corporate financial distress [21], enterprises financial deleverage [44], but few research studies have explored the impact factor of corporate leverage [45]. Scholars have clarified that corporate leverage investment can significantly improve corporate value [45]. Operating performance can reduce financing costs, enhance corporate investment performance and promote financial innovation to mitigate financial risk [46], after verifying the important of corporate leverage ratios investment and further including what factors impact corporate leverage performance and how to enhance corporate operating efficiency and achieve financial development by improving corporate leverage ratios performance. This study explores the performance of digital finance and corporate leverage ratios to answer these questions before conducting the empirical analysis. Our proposed research hypotheses are given below. However, limited attention has been paid to identifying the determinants of corporate leverage performance and strategies for enhancing corporate operating efficiency to achieve financial development through improved leverage ratios. Thus, this study aims to fill this gap by examining the relationship between digital finance performance and corporate leverage ratios, thereby shedding light on key drivers of corporate financial health and efficiency in the digital era. This revision aims to provide a more structured and coherent overview of the literature, emphasizing the gap in existing research and the specific focus of the current study. Additionally, it suggests directions for future research by highlighting the importance of understanding the determinants of corporate leverage performance and strategies for enhancing corporate operating efficiency in the context of digital finance.

2.2 Relationship of digital Finance with the leverage ratio

The main objective of this study is not only to investigate the relationship between digital finance and corporate leverage ratios but also to address the impact mechanism among them. Dai et al [44] argues that the development of digital finance can reduce the leverage ratio of firms through facilitating of financial constraints and reducing finance cost. On the other hand, corporate leverage ratios play a crucial role in negative moderation. However, the development of digital finance alleviates financing constraints and information about the firm’s asymmetry. Existing studies have clarified that the development of digital finance can stress firms’ access to finance by using advanced financing services technology, e.g., P2P landing and third-party payment, to meet financial needs [44]. The development of digital finance can connect the large number of similar groups created by traditional finance with the consistent low threshold, low cost, and high-efficiency internet-based financial services to engage them to get liquidity resources, and firms no longer need to obtain leverage funds. In addition, the development of digital finance can reduce the firm’s production and operating costs and improve productivity by using emerging technologies such as artificial intelligence, information, big data, and computing codes [47].

On the other hand, digital financial development is methods of a corresponding digital ecosystem. For example, big data information and credit collection and internet-based technological investment, which enables digital finance to obtain efficient information processing and risk mitigation capacity and significantly reduce the transaction cost, time cost, and employing information technology. Further helping firms to reduce financial costs and obtain funds with higher efficiency, thus achieving the goal of lower leverage [44]. In another hand, digital finance can enhance the efficiency of capital utilization, and also reduce capital destruction risk in financial mechanism process, thus helping enterprises stabilize their financial level, reducing their demand for external leverage financing. In addition, developing digital finance promotes enterprises’ digital transformation, improving their management efficiency and financial control ability and avoiding ineffective leverage. In other words, enterprises can obtain funds efficiently, which is reflected in the fact that digital inclusive finance can reduce the leverage level of enterprises by reducing their financing costs.

The development of digital finance can reduce the cost of assessment and audit costs when financial institutions credit enterprises, thereby improving the efficiency of investment and financing to achieve optimal resource allocation. Moreover, after the lending of funds, digital finance can also enable financial institutions to increase the real-time understanding of enterprises through information platforms. For instance the Internet, effectively supervise the flow of their loan funds, ensure the safety of funds, reduce the loss of bad debts, and thus reduce the financing costs of enterprises [48]. In addition, it can be seen from the cost-benefit theory that the reduction of financing costs will reduce the cost of production and operation of enterprises, increase the income of their investment and operation, enable enterprises to have more surplus funds for large-scale reproduction and debt repayment, thereby reducing the leverage ratio of enterprises. From the perspective of capital supply, digital finance can also alleviate the financing constraints on enterprises by making up for the shortcomings of traditional financial services and expanding the coverage of financial services [49]. This is because, on the other hand, digital finance can break through geographical restrictions, realize the diversification of investment entities, and improve the availability of financing funds. In addition, it can enhance the practical identification and selection of the demand side of funds with the help of continuous improvement of information technology, reduce the probability of mismatch of funds, and weaken the degree of financing constraints on enterprises. From the viewpoint of capital demand, the development of digital finance can enable non-state-owned and small-scale enterprises with limited collateral, such as liquidity constraints initially excluded from traditional finance, to obtain more credit funds and reduce their financing constraints [50]. It can be seen from the theory of financing constraints that the reduction of the degree of financing constraints can enable enterprises to obtain the funds needed for investment, production, and operation on time, reduce the financial risks or financial difficulties that enterprises may encounter, and ensure the effective investment needs of enterprises. Furthermore, the effective investment needs of enterprises will help improve their profitability so that they have more surplus funds for debt repayment, thereby reducing corporate leverage.

In addition, agency theory [51] shows that the principal-agent relationship problem caused by information asymmetry will lead to "short-sighted behavior" in management and the incentive to use management rights to speculate about improving their profits, which is not only detrimental to the development of the enterprise but also increases the risk in the business process of the enterprise [52]. The development of digital finance can also improve the flexibility of enterprises in dealing with risks by helping them establish and improve their own risk early warning systems and control systems [53]. Reducing operational risks and enhancing risk-bearing capacity will help increase the profitability of enterprises and the ability to repay debts, thereby reducing the enterprise leverage ratio. However, combined with the theory of cost and benefit, theory of financing constraints and the theory of agency, the development of digital finance may reduce the leverage ratio of enterprises by lowering financing costs, alleviating financing constraints, and weakening business risks. Because of this, the following research hypothesis is proposed.

1. H1: The development of digital finance can reduce the corporate leverage ratio of enterprises.

2.3 Heterogeneity analysis

2.4 Mechanism analysis

2.4.1 The development of digital finance affects corporate leverage ratios.

This study’s main purpose is to identify the relationship between the development of digital finance and corporate leverage ratios and examine how digital finance reduces corporate leverage by lowering financing costs, alleviating financing constraints, and weakening non-systemic risks. The development of digital finance offers several benefits for businesses, such as reducing financial risk and alleviating financing constraints. Firstly, digital finance provides businesses access to alternative funding sources [10, 63]. These sources include crowdfunding platforms, peer-to-peer lending platforms, and online marketplaces. By diversifying their sources of financing, businesses can reduce their reliance on traditional financial institutions and increase the chances of securing funding for their operations. Second, digital finance plays a crucial role in alleviating enterprise financing constraints. It provides new financing channels, such as crowdfunding platforms or peer-to-peer lending, which can connect enterprises with potential investors or lenders specifically interested in supporting enterprises [65]. These platforms use digital technologies to facilitate capital matching with enterprises, reducing the barriers to accessing funding. Additionally, digital finance allows enterprises to reach a larger pool of investors or lenders beyond their local industry [66]. This increased access to funding sources expands the opportunities for enterprises to secure the financing they need to grow and develop. Furthermore, digital finance platforms offer faster and more streamlined loan application processes than traditional financial institutions. This speeds up the funding process and reduces the time and effort required for enterprises to obtain financing. In addition, digital finance tools enable enterprises to automate financial processes, such as invoice management and payment collection, reducing the risk of errors or delays. This automation increases financial efficiency and reduces the likelihood of financial mismanagement or fraud, thereby minimizing financial risk for the enterprise [59]. Finally, Digital finance solutions, such as financial management software or dashes, provide real-time data on various financial metrics, allowing enterprises to continuously monitor and assess their financial health. This real-time access to financial data enables timely identification of potential risks and the ability to take proactive measures to mitigate them [67]. This includes identifying cash flow issues, monitoring debt levels, assessing liquidity positions, and evaluating financial ratios [68]. Moreover, digital finance reduces the enterprise’s financial risk by alleviating financing constraints, streamlining financial processes, enabling real-time access to critical financial data, and enhancing risk assessment and monitoring capabilities through big data analytics. Therefore, this paper proposes the following hypothesis:

1. H4: Digital finance can reduce an enterprise’s financial risk through alleviating financing constraints. Fig 1 shows the conceptual model.

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Fig 1. Conceptual model.

Note: Hypothesis: H1: H1: The development of digital finance can reduce corporate leverage ratio of enterprises. Hypothesis: H2: The development of digital finance can reduce corporate leverage ratios, affecting both large-scale and small-scale enterprises, and high-leverage and low-leverage enterprises. Hypothesis: H3: The development of digital finance can reduce the corporate leverage ratios, of both state-owned and non-state-owned enterprises. Hypothesis: H4: digital finance reduces the enterprise’s financial risk by alleviating the financing constraint.

https://doi.org/10.1371/journal.pone.0302978.g001

3.1 Model specification

Based on hypotheses development, in this study, we employ an econometric approach utilizing panel data regression analysis to examine the relationship between digital finance development and leverage ratios. Stata software is used as an analytical tool because of its robust capabilities in handling panel data and estimating regression models. The rationale for selecting this econometric model lies in its ability to control unobserved heterogeneity across entities and periods, providing a more accurate estimation of the relationship between digital finance development and leverage ratios. By including control variables indicating enterprise characteristics, industry effects, and time trends, we aim to investigate the multifaceted nature of the relationship and generate insights into how digital finance impacts leverage ratios among various enterprises. Drawing on the research methods of existing literature [70], the model is specified as follows.

(1)

In testing Hypothesis 1, we employed model (1), where lev represents the corporate leverage ratio of enterprise i at year t DIF represent the level of digital financial development, CV encompasses a set of control variables, and Industry and year account for industry and time fixed effects, respectively. The variable ε represents the random error term, and j represents the control variable. Focusing on the regression coefficient λ_1 of the digital financial development level (DIF), a positive and significant λ_1 would imply that the development of digital finance increases the corporate leverage ratio, leading to the rejection of Hypothesis 1. Conversely, a negative and significant λ_1 would support Hypothesis 1, indicating that the development of digital finance does not increase the corporate leverage ratio. To explore potential heterogeneity in the impact of digital financial development on the corporate leverage ratio based on enterprise characteristics, we extend Model (1) by introducing interaction terms (DIF× var). These interaction terms incorporate digital financial development and enterprise grouping variables, allowing us to examine the size and significance of the coefficients. If the coefficient of the interaction term (DIF × var) is harmful and significant, Hypothesis 2 is validated. Conversely, if the coefficient is not harmful and significant.

3.2 Variables definition

3.2.1 Corporate leverage ratio.

The corporate leverage ratios are measured by the total liabilities divided by the total assets as a proxy indicator used by Kanoujiya et al [71] and Muthama et al [72]. Corporate leverage ratios with different maturities will impact a company’s solvency, production, and operation; the corporate leverage ratio is divided into short-term leverage ratio (LEV) and long-term leverage ratio (LLEV) to comprehensively examine the impact of digital financial development. The short-term leverage ratio (SLEV) is measured by the current liability ratio to total assets. In contrast, the long-term leverage ratio (LLEV) is the ratio of non-current liabilities to total assets. Table 1 highlights the concepts and definitions of variables.

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Table 1. Variables concept and definitions.

https://doi.org/10.1371/journal.pone.0302978.t001

4.1 Descriptive statistics

The descriptive statement presented in Table 2 show substantial variability in the leverage ratios among the sampled firms, with a mean leverage of 0.430 and a notable difference in preference for short-term debt (mean short-term leverage ratio of 0.34) as compared to long-term debt (mean long-term leverage ratio of 0.09). This disparity underscores the strategic financial decisions that enterprises make in the context of digital financial development, which averages a relatively high and low value of 5.91. When examining control variables, there is a right-skewed distribution in fixed assets, operating income growth, Tobin’s Q, and economic growth, indicating that a minority of firms possess exceptionally high values in these areas. In contrast, variables such as listing time and currency growth rate display a left-skewed distribution. The congruence between average and median values for return on assets, operating cash flow, equity concentration, and enterprise size suggests these variables are normally distributed within the sample. This overview reveals the intricate implications of digital finance in shaping corporate financial leverage and highlights the need for firms to leverage flexible financial strategies that can accommodate the dynamic interplay of technological advancement and economic indicators.

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Table 2. Descriptive statistics.

https://doi.org/10.1371/journal.pone.0302978.t002

4.2 Baseline regression

Table 3 presents the empirical findings derived from Model (1), indicating a significant and negative correlation between the development of digital finance and corporate leverage. Columns (2) and (4) display the outcomes of a univariate regression of digital financial development while controlling for industry and time-fixed effects. The inclusion of columns (2)-(1) in the regression demonstrates that digital finance development markedly reduces corporate leverage ratios. Furthermore, Columns (3) and (4) disentangle short-term leverage (SLEV) and long-term leverage (LLEV) for regression based on the term structure variance in corporate leverage. The results indicate a noteworthy negative impact of digital finance development on both short-term and long-term corporate leverage. In an economic context, a one-standard-deviation increase in digital finance development corresponds to a 0.137% decline in the sample standard deviation of the total corporate leverage ratio. Additionally, it is associated with 0.086% and 0.05% declines in the sample standard deviations of short-term and long-term leverage ratios, respectively. Control variables in Column (2) reveal that the proportion of fixed assets demonstrates a significant positive correlation with the corporate leverage ratio. This suggests that a higher proportion of fixed assets strengthens an enterprise’s borrowing ability and facilitates more access to mortgage loans, elevating the leverage ratio. Return on assets exhibits a strong negative correlation, implying that a high asset utilization ratio increases internal funds, enhancing solvency and reducing the corporate leverage ratio. Operating cash flow is positively and significantly correlated with the corporate leverage ratio, indicating that increased operating cash flow alleviates financing constraints and provides more funds for debt repayment and operations, leading to a lower leverage ratio. Conversely, operating income growth shows a significantly positive correlation with the corporate leverage ratio, suggesting that firms with expanding incomes may leverage debt to fuel further growth. Equity concentration negatively correlates with the enterprise’s leverage ratio, pointing to a lower debt level in enterprises with higher governance levels. Larger enterprises with more collateral find it easier to secure credit, leading to higher debt levels. A longer time since going public facilitates more open access to credit markets, resulting in higher leverage. Lastly, a higher economic growth rate correlates positively with leverage, reflecting the ease of obtaining credit in a favorable macroeconomic environment for enterprises. These macroeconomic indicators underscore that a robust economic backdrop facilitates reduced debt levels for enterprises.

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Table 3. Baseline regression results.

https://doi.org/10.1371/journal.pone.0302978.t003

4.3 Robustness tests

4.3.1 Endogenous test.

Table 4 regression results presented that the crucial insights into the relationship between digital finance development and corporate leverage ratios. Across all four models, the coefficient for digital finance development (DIF) consistently demonstrates a statistical significance level of 1%, indicating a robust negative association with corporate leverage. Specifically, in the case of the dependent variable LEV (Corporate Leverage Ratio), the coefficient in Model (1) is -0.193, suggesting that for every unit increase in digital finance development, the corporate leverage ratio reduced by 0.193 units. This negative impact persists in Models (2), (3), and (4) for different specifications of the dependent variable, including overall leverage (LEV), short-term leverage (SLEV), and long-term leverage (LLEV). The statistical significance of the coefficients is supported by the remarkably high t-statistics, ranging from -6.910 to -13.774, emphasizing the reliability of the results. Moreover, the control variables, time effects, and industry effects consistently play a role in shaping the corporate leverage ratios, contributing to the overall explanatory power of the models. The large sample size (No. of Obs. = 19,288) enhances the reliability and generalizability of our findings. The R2_a values, though relatively low, indicate a proportionate variance in corporate leverage ratios explained by the models, with model (2) having the highest R2_a at 0.3206. The regression results reaffirm a robust and statistically significant negative relationship between digital finance development and corporate leverage ratios, providing valuable insights into the impact of digital finance on the financial structures of enterprises over both short- and long-term leverages.

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Table 4. Regression results.

https://doi.org/10.1371/journal.pone.0302978.t004

4.3.2 Sub-sample test.

The changes in the financial environment will have a particular impact on the development of digital finance; ignoring these changes may affect the conclusions of the above research. Therefore, to exclude the impact of the financial events in China in 2015 on the financial environment, a sub-sample from 2011 to 2020 (except 2015) was used for regression as mentioned in Table 5. The results show that the above conclusions are robust.

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Table 5. Subsample (excluding 2015) regression results.

https://doi.org/10.1371/journal.pone.0302978.t005

4.3.3 Introducing lagged terms.

Previous periods’ corporate leverage ratio may impact the current period’s corporate leverage ratio. Therefore, to avoid omitting the corporate leverage ratio in prior periods and affecting the above research conclusion, the one-year lag of the corporate leverage ratio is introduced into regression (1). The results in Table 6 show that the research conclusions are robust.

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Table 6. Explanatory variables.

https://doi.org/10.1371/journal.pone.0302978.t006

4.3.4 Quantile regression.

To study how the impact of digital finance development is different under various leverage ratio levels and to conduct further robustness check, this paper performed quantile regression at 25%, 50%, and 75%, respectively. It can be seen from Table 7 that DIF coefficients under the three percentiles are always significantly negative, and the coefficients gradually become smaller as the percentiles increase. The results show that the above research conclusions are robust.

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Table 7. Quantile regression.

https://doi.org/10.1371/journal.pone.0302978.t007

4.4 Heterogeneity

Since China is a vast country with huge differences in natural geographic conditions and economic development levels in different regions, the influence of digital financial development on corporate leverage ratios to the achievement of distinct enterprises may vary significantly. Through heterogeneity analysis, this study can inspect the causality between the achievement of corporate leverage ratios and digital financial inclusion more thoroughly to promote sustainable corporate financial development.

As mentioned above, digital finance can reduce enterprises’ corporate ratios. The sampled enterprises are further into sub-grouped such as firm ownership (SOE), scale (SCA), profitability (PRO) and leverage level (HL); the relationship between digital finance development and these enterprises is created and estimated based on model (1) where Column (1) of Table 8 the results of grouping by ownership (SOE) show that the relationship between digital finance development on the leverage ratio of non-state-owned enterprises is -0.135, while the regression coefficient of the relationship between digital finance development and the leverage ratio of state-owned enterprises (SOE) is -0.137, which is significant at the 1% level. The results indicate that digital finance development has a relatively high adverse effect on the leverage ratio of non-state-owned enterprises. Column (2) shows the results obtained by grouping regression according to the firm’s size. It shows that for small-size enterprises, the impact of digital finance on the corporate leverage ratio has a coefficient of -0.137, while for large-scale enterprises, the regression coefficient is -0.137, which are significant at a 1% level. This shows that compared with large-scale enterprises, digital finance development has a relatively large and negative effect on the leverage ratio of small-scale enterprises. Column (3) shows that the regression according to enterprise profitability grouping, also compared with high-profit enterprises, the negative effect of digital financial development on the leverage ratio of low-profit enterprises is relatively large, but the difference is not significant. Similarly, in Column (4), the result indicates grouping regression according to the leverage level of enterprises, which shows that the negative impact of digital financial development on the leverage ratio of low-leverage enterprises is relatively large compared with high-leverage enterprises. The digital finance development on leverage ratios across different types of enterprises. By implementing the suggested recommendations, policymakers and financial institutions can strive to promote financial stability and sustainable growth for state-owned and non-state-owned enterprises, small-scale and large-scale enterprises, as well as low-profit and both low and high-leverage enterprises. These targeted measures aim to facilitate better leverage management and capitalize on the opportunities presented by digital finance, ultimately contributing to enterprises’ overall resilience and competitiveness in an evolving financial landscape.

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Table 8. Heterogeneity test ratio.

https://doi.org/10.1371/journal.pone.0302978.t008

Overall, the results in Table 8 shows that the development of digital finance can significantly reduce the corporate leverage ratio and that the impact of digital finance development on the corporate leverage ratio is heterogeneous due to the different characteristics of enterprises. Digital finance development has a more significant deleveraging effect on private, small-scale, and low-leverage enterprises, suggesting that H2 cannot be rejected.

6.1 The degree of marketization

Table 11 presents the impact of digital finance development on corporate leverage in both low and high degrees of marketization. In the low degree of marketization column (1), the coefficient for DIF is -0.149, indicating a negative association between increased digital finance development and corporate leverage reduction in regions with low marketization levels. Additionally, the coefficient of -0.426 suggests a significant negative impact on leverage even when controlling for other factors, emphasizing the importance of digital finance in leverage reduction. Similarly, in the high degree of marketization column (2), the DIF coefficient value of -0.144 mirrors the findings in low marketization scenarios, indicating that increased digital finance development in highly marketized regions significantly reduces corporate leverage. This underscores the broad impact of digital finance on economic and social development, with its effects on corporate leverage varying depending on enterprise characteristics and the economic environment. Columns (1) and (2) also provide insights from group tests using the China Marketization Index sourced from the Wind database. Enterprises located in regions with marketization index values above the median are categorized as high marketization areas, while those below are considered low marketization areas. The results from Table 11 indicate that in high marketization areas, the negative impact of digital finance development on corporate leverage is less pronounced compared to low marketization areas. This suggests that continued promotion of marketization enhances the stability of leverage ratios, underscoring the pivotal role of marketization in driving economic growth.

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Table 11. External economic impact of digital finance and leverage ratio.

https://doi.org/10.1371/journal.pone.0302978.t011

6.2 Degree of financial supervision

Table 11 shows in Column 3, loose supervision represents the DIF coefficient -0.147 in an environment of loose supervision. The coefficient signifies a significant negative relationship between digital finance development and corporate leverage. The coefficient is -0.542; the constant term continues to harm leverage, while the coefficient is 0.564. The constant term remains negatively significant, implying a consistent impact on leverage. In Column 4, Strict Supervision -0.136 indicates that. Even under strict supervision, increased digital finance development correlates with a significant reduction in corporate leverage. The coefficient value -0.411 represents the constant term, which is negatively significant, indicating a consistent impact on leverage. The regulation of digital finance will not only affect its development process but may also affect its relationship with corporate leverage. To test whether the degree of financial supervision affects the relationship between digital finance development and corporate leverage ratio, following [84, 85]. The columns (3)-(4) of Table 11 indicate the negative impact of digital financial development on corporate leverage ratio during the period of strict financial supervision, this shows that appropriate deregulation of digital finance will help to improve the deleveraging effect.

7.1 Conclusions

Based on a sample of 2011–2020 A-share non-financial listed companies in China, this paper examines the impact and mechanism of digital finance development on corporate leverage. The following conclusions can be drawn from the research findings: Firstly, digital finance development shows a significant negative correlation with the corporate leverage ratio. Moreover, after considering the difference in the term structure of corporate leverage ratio, it found that digital finance development exhibits a significant negative correlation with both short-term and long-term corporate leverage ratios. This suggests that digital finance development contributes to reducing the leverage ratio of enterprises, be it short-term or long-term leverage. Secondly, the negative impact of digital financial development on corporate leverage is heterogeneous due to the different characteristics of enterprises, including state-owned and non-state-owned enterprises, large and small-scale enterprises, and high-leverage and low-leverage enterprises. Third, Mechanism analysis demonstrates that the development of digital finance can reduce the corporate leverage ratio by lowering financing costs, easing financing constraints, and weakening non-systemic risks. Finally, Research on the external economic environment suggests that actively promoting the marketisation process and appropriately strengthening financial supervision will help enhance the positive impact of digital financial development on enterprise deleveraging.

This study empirically analyses the relationship between the development of digital finance and corporate leverage ratios within the existing theoretical framework and data availability. However, due to the initial stage of corporate leverage ratio disclosure and the lack of leverage data by many listed firms, the available data for this study has some limitations. In addition, we examine the mechanism through which digital finance affects corporate leverage ratios. There may be another possible technique through which digital finance may impact corporate leverage performance. Future studies can be conducted from corporate financing performance, internal audit mechanisms, and digital finance perspectives. This study focuses on the improvement that digital finance brings to enterprises’ leverage ratio performance; it would also be worthwhile to evaluate the positive impact of digital finance on firms’ operational performance. All these highlighted problems above are worth recommending in depth for future research.

7.2 Policy recommendations

Based on the above analysis, this paper puts forward the following policy suggestions: First, increase policy support and actively promote the marketization process to improve the deleveraging effect of digital finance. The development of digital finance can not only reduce the leverage ratio of enterprises, but also the impact of deleveraging is affected by the degree of marketization. Therefore, increasing policy support for the development of digital finance, establishing and improving the infrastructure for the development of digital finance, and actively promoting the marketisation process will help to play the deleveraging role of digital finance better. Second, innovate digital financial supervision and guide the healthy development of digital finance to strengthen the positive effect of digital finance on corporate deleveraging. The development time of digital finance is short, and its development model is not yet mature. Financial supervision needs to be adequately strengthened to regulate and guide its healthy development. Therefore, to effectively play the role of the development of digital finance in deleveraging enterprises, the regulatory authorities should innovate the financial supervision model while strengthening the supervision of digital finance and preventing its potential risks to ensure the healthy development of digital finance and strengthen its positive effect. Third, State-owned enterprises in China often have access to preferential lending rates and support from the government, which can result in higher leverage ratios compared to non-state-owned enterprises. On the other hand, non-state-owned enterprises may face more stringent lending conditions and higher borrowing costs, leading to lower leverage ratios. This study further policy recommends implementing a standardized and transparent framework for determining corporate leverage ratios applicable to state-owned and non-state-owned enterprises. This framework should consider different industries’ specific characteristics and risks while ensuring consistency in measuring leverage ratios across enterprises. Finally, developing digital finance is an opportunity to promote digital links between financial institutions and enterprises so that enterprises can actively participate in deleveraging. Information has become a key element in the development of modern enterprises. By strengthening the digital connection between financial institutions and enterprises, financial institutions can timely and effectively understand the operating conditions of enterprises. On the other hand, it can improve information transparency among economic agents and enable enterprises to actively participate in deleveraging and control the leverage ratio within a reasonable range.