Friend or foe: The divergent effects of FinTech on financial stability

By Derrick W. H. Fung, Wing Yan Lee, Jason J. H. Yeh, F. L. Yuen. 2020

155 citations recorded by the source corpus.

Abstract Whether FinTech causes the fragility of financial institutions is a controversial issue. Using a panel sample of listed banks from 84 countries, we exploit the introduction of FinTech regulatory sandboxes as an exogenous shock and examine the heterogeneous effect of FinTech on the fragility of financial institutions. We find that (i) a shock to FinTech innovations has no net effect on the fragility of financial institutions when we ignore market characteristics, (ii) promoting FinTech decreases (increases) the fragility of financial institutions in emerging (developed) financial markets, and (iii) FinTech affects the fragility of financial institutions through the channel of profitability.

Subfields: Economics and Econometrics, Finance, Management Information Systems

View Paper: https://www.semanticscholar.org/paper/df62a959965f627ac6e40f53aea94ebaa12703de