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      Access to the Internet and Access to Finance: Theory and Evidence

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      Sustainability
      MDPI AG

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          Abstract

          This paper aims at investigating the relationship between the use of the Internet and access to external finance of small and micro businesses, both theoretically and empirically. We first develop a theoretical model to explore how access to the Internet affects the credit availability of firms. The model suggests that access to the Internet can effectively mitigate financing difficulty of firms by alleviating information asymmetry and reducing agency cost, and thus can promote the sustainable development of those firms. The model also shows that access to the Internet can improve social welfare based on aforementioned mechanism. Using China household finance data from China Household Finance Survey, we tested the impact of access to the Internet on access to finance of small and micro businesses. Our empirical results confirm the positive role played by access to the Internet in alleviating financing difficulty of those firms. Moreover, we also found evidence that access to the Internet can reduce borrowers’ dependence on physical branches of banks when making bank choice decision for loan applications. Our evidence also implies that access to the Internet is conducive to the sustainable development of small and micro businesses via mitigating their financing difficulty.

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          Moral Hazard and Observability

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            Financial Intermediation and Delegated Monitoring

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              The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle

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                Author and article information

                Journal
                SUSTDE
                Sustainability
                Sustainability
                MDPI AG
                2071-1050
                July 2018
                July 19 2018
                : 10
                : 7
                : 2534
                Article
                10.3390/su10072534
                7dc62124-ca49-452c-88b4-6ede39eafb99
                © 2018

                https://creativecommons.org/licenses/by/4.0/

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