Legal enforcement and fintech credit: International evidence

Hongfeng Peng, Jiao Ji, Hanwen Sun and Haofeng Xu

Journal of Empirical Finance, 2023, vol. 72, issue C, 214-231

Abstract: Previous studies have shown that the quality of legal institutions is negatively associated with the interest rates of business loans. Fintech lending, with improved ex ante risk-sharing practices that change the approach to credit provision, presents a challenge to the traditional relationship between law and finance. Compiling and studying over five million fintech loans from 24 countries, we show that, in comparison to traditional bank loans, the quality of legal enforcement matters less to the cost of fintech credit. Nonetheless, the impact of legal protection on the interest rates of fintech credit is more persistent when (1) the loans bear higher risk, (2) the fintech platforms have fewer risk-sharing tools, and (3) borrowers’ jurisdictions have fewer information-sharing channels. Our study contributes to the debate on the role of legal protection in the fintech credit market.

Keywords: Legal enforcement; Fintech credit; Risk sharing; Information sharing (search for similar items in EconPapers)
JEL-codes: G23 K49 O33 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:72:y:2023:i:c:p:214-231

DOI: 10.1016/j.jempfin.2023.03.007

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