Political background, digital finance, and risky financial asset allocation

The influencing factors of household financial asset allocation have been widely discussed in household finance, but little is known regarding the impact of political background. Using data from the China Family Panel Studies spanning 2012 to 2020, this paper examined the relationship between political background and risky financial market participation and investigated whether digital finance could moderate the relationship. The findings demonstrated that political background had a positive impact on households’ participation in the risky financial market in China. Furthermore, social networks, credit support, and subjective well-being were the channels through which political background promoted risky financial asset holdings. In addition, the positive effect of political background on risky financial market participation would be mitigated by the development of regional digital finance. Our study explained the limited participation puzzle in the risky financial market in China from the perspective of political background and highlighted the importance of an inclusive financial environment to reduce the inequality of risky financial market participation.