The impact of financial technology on China’s banking industry: An application of the metafrontier cost Malmquist productivity index

Tsui-Yueh Cho and Yi-Shuan Chen

The North American Journal of Economics and Finance, 2021, vol. 57, issue C

Abstract: Technology advancements have increased the hopes of banks around the world in terms of securing a prominent place in global finance. The Chinese government explicitly regards the development of financial technology (Fintech) as an essential strategy for improving banking performance. However, the debate on the impact of costly Fintech innovation on Chinese banking performance has not been resolved. This study therefore applies the data envelopment analysis (DEA) approach to define the metafrontier cost Malmquist productivity index (CMM) under variable returns to scale (VRS) in order to analyze the factors and identify the sources of changes in cost-side productivity and their economic implications. The results show that the average CMM score was 1.0626, implying a 6.26% improvement in the cost Malmquist productivity during the study period. The results of implementing the system-GMM model also indicate that the greater the banks’ share of mobile device transactions and the larger the banks’ third-party payment transactions volume, the higher the cost productivity growth rate.

Keywords: Financial technology (Fintech); Data envelopment analysis (DEA); Metafrontier cost Malmquist productivity index (CMM); variable returns to scale (VRS) (search for similar items in EconPapers)
JEL-codes: D24 G21 L25 O43 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:57:y:2021:i:c:s1062940821000486

DOI: 10.1016/j.najef.2021.101414

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