Fintech development and bank risk taking in China

Rui Wang, Jiangtao Liu and Robin Hang Luo

The European Journal of Finance, 2021, vol. 27, issue 4-5, 397-418

Abstract: This paper empirically tests the effect of FinTech development on bank risk taking using unbalanced bank-level panel data from China for the period from 2011 to 2018. We use the media's attention paid to FinTech-related information to gauge FinTech development. We find robust evidence that the development of FinTech exacerbates banks’ risk taking in general. The heterogeneity analysis further indicates that the asset quality deterioration effect brought about by prosperous FinTech is more salient in banks with larger sizes, lower efficiency, more shadow banking business and more interest-based income. Moreover, the nexus between FinTech and banks’ risk taking is a U-shaped trend, with FinTech initially intensifying and then weakening banks’ risk taking. Moreover, the banks’ responses regarding the U-shaped effect are heterogeneous among different ownership structures. The responses by state- and jointly owned banks are not notable, while those of city banks, foreign banks and rural banks are more sensitive.

Date: 2021
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Citations: View citations in EconPapers (53)

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Persistent link: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:27:y:2021:i:4-5:p:397-418

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DOI: 10.1080/1351847X.2020.1805782

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