FinTech-amplified credit risk: excess leverage and regulatory discipline in China’s real estate crisis

Does financial technology (FinTech) exacerbate or mitigate corporate over-leverage? We examine this question in China’s real estate sector, where systemic debt accumulation poses significant financial stability risks. Using panel data on listed firms from 2011 to 2022, we employ fixed effects, generalized structural equation modeling (GSEM), instrumental variable estimation, and two-step system GMM estimators to identify causal effects and mechanisms. We find that FinTech significantly increases excess leverage. This effect operates primarily through the easing of financing constraints, which enables managers in high-agency-cost firms to accumulate debt rather than undertake efficient investment. Governance improvements associated with FinTech provide only a modest countervailing force. However, China’s 2020 Three Red Lines macroprudential policy fundamentally restructures these relationships, neutralizing FinTech’s leverage-amplifying effect by binding the credit supply channel. Our findings reveal that FinTech’s credit-enhancing function can amplify systemic risk when agency costs are high, but demonstrate that well-designed regulation can discipline technology-driven credit expansion. These results contribute to the literature on financial innovation, corporate governance, and macroprudential policy in emerging markets. Similar content being viewed by others