Has COVID-19 hindered small business activities? The role of Fintech

Investigations into the effects of the pandemic on small businesses remain insufficient, and the role of Fintech during a pandemic has rarely been investigated. Using novel firm-level data on registration and various identifications of fixed-effect and difference-in-difference models, we exploit the interactive effect of lockdown policies and Fintech on the creation of small businesses. First, both lockdown policies and Fintech have negative impacts on new firm creation in the manufacturing sector. Second, lengthier pandemics induce more severe destruction of firm registrations. Third, an alternative indicator shows that Fintech is not intensively related to labor demand in the manufacturing sector. Policy implications call for higher match efficiency between the manufacturing sector and financial resources to reduce financial misallocation to a large extent.