Investigating the Impact of Regional Digital Finance Development on Short-run IPO Performance: Empirical Evidence from China

This study investigates the influence of regional digital finance development on corporate short-run IPO performance, using a sample of 1,478 IPO firms listed on the Shenzhen and Shanghai Stock Exchanges from 2011 to 2021. Employing the Peking University Financial Inclusion Index as a measure of regional digital finance development and first-day IPO returns as the measure of short-run IPO performance, our baseline regression results show that regional digital finance development significantly fosters the IPO short-run performance. The results of mechanism analysis shows that information transparency serves as the significant mediation variable to strength the nexus of regional digital finance development with corporate IPO short run performance. Additionally, robustness checks using a two-stage least squares (2SLS) approach with provincial internet penetration as an instrumental variable validate the baseline findings. Furthermore, the results of firm level heterogeneity analysis shows that smaller firms and state-owned enterprises (SOEs) benefit more from digital finance development in terms of IPO performance compared to non-SOEs and larger firms.