Conference Agenda

We study how shifting data ownership from lenders to borrowers would affect data production, fintech entry, and resource allocation efficiency. We categorize borrowers' data into portable and non-portable elements. Portable data, which requires active production and is transferable, will provide more accurate information. In our model, an incumbent bank, endowed with non-portable data, determines the amount of portable data produced, while a potential fintech entrant is more efficient at analyzing it. Our findings indicate that the shifting of data ownership will reduce portable data production, thereby diminishing resource allocation efficiency, despite encouraging fintech entry. The bank's non-portable data endowment and fintech's analytical efficiency have non-continuous, non-monotonic effects on portable data production.

This paper studies the impact of digitized invoices on small business lending through China’s Golden Tax Phase III Project, which established a unified tax-reporting system and digitized VAT invoices. Using the project’s staggered provincial rollout as a natural experiment and a difference-in-differences (DID) design, I find that small businesses in treated provinces obtain substantially larger credit lines, pay lower interest rates, and enjoy longer maturities. Banks also report higher measured incomes and assign higher internal credit scores to these firms. I trace these improvements to the elimination of fraudulent invoices, which endows banks with more reliable hard information for income assessment and risk-based pricing. As a result, digital invoices mitigate information asymmetries in lending, allowing banks to extend more and cheaper credit to firms lacking hard information. Consistent with this mechanism, the largest credit gains occur in invoice-intensive industries; the most opaque borrowers (e.g., individually owned businesses) and small banks experience the greatest benefits. Finally, macro-level credit data from the People’s Bank of China corroborate my micro-level findings. Overall, this study highlights the critical role of digital tax infrastructure in alleviating financing frictions for small businesses and underscores its broader importance for financial inclusion and economic growth.