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

Derrick W.H. Fung, Wing Yan Lee, Jason J.H. Yeh and Fei Lung Yuen

Emerging Markets Review, 2020, vol. 45, issue C

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.

Keywords: FinTech; Financial stability; Sandboxes; Emerging financial market; Developed financial market (search for similar items in EconPapers)
JEL-codes: G21 G28 O33 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:45:y:2020:i:c:s1566014120301072

DOI: 10.1016/j.ememar.2020.100727

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