Big Data, Financial Digitalization and Enterprises’ Shift from Real to Virtual

Abstract

Technological advancements, for instance, big data, mathematical modeling, the Internet of Things, blockchain, and cloud algorithms, have made inclusive finance more feasible. In order to cope with future uncertainties and reduce operational risks, enterprises might increase the proportion of financial assets. Finance, real estate, and other industries have become more and more important to enterprises in recent years. The aim of this paper is to examine how the progress in digital finance has enabled businesses to become more "financial" and to formulate the following policies. The model used in this paper researched how financial digitization affects the degree of financialization of firms. Digital technology has significantly contributed to the financialization of enterprises based on experimental results. A shift from real to virtual economy may result from more real enterprises participating in financial investment or financial business. Based on the model above, dummy variables and their interaction terms are introduced, which shows digitalization level has no heterogeneous effect on the degree of financialization in large and small enterprises. The study discovered that developing digital finance has a favourable impact on how financial assets are allocated by businesses (regardless of size). Due to the financialization of these businesses, financial markets have surely grown more competitive, putting pressure on all participants, and presenting opportunities and threats.