How fintech impacts pre‐ and post‐loan risk in Chinese commercial banks

Ailian Zhang, Shuyao Wang, Bai Liu and Pei Liu

International Journal of Finance & Economics, 2022, vol. 27, issue 2, 2514-2529

Abstract: Due to information asymmetry in the lending market, credit activities inevitably cause pre‐ and post‐loan risk in banks. To explore whether these risks can be alleviated by fintech and study its specific mechanism from the perspective of managers, we investigate on a sample from the establishment of fintech subsidiaries in Chinese commercial banks during 2014–2018. The results show that fintech can alleviate pre‐loan risk associated with credit activities, and this negative effect is more pronounced in banks with higher level of managerial ownership. As the control of post‐loan risk is more dependent on the regulators, fintech in banks has no significant effect on reducing post‐loan risk associated with credit activities. This paper adds empirical evidence on the role of fintech in banks.

Date: 2022
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