Banks’ investments in fintech ventures

Emma Li, Mike Qinghao Mao, Hong Feng Zhang and Hao Zheng

Journal of Banking & Finance, 2023, vol. 149, issue C

Abstract: We investigate the patterns and performance of banks’ investments in fintech ventures in the United States. We document that banks, as compared to independent venture capitalists (IVCs), invest a larger proportion in fintech startups and achieve a higher IPO exit rate. The better exit performance is neither explained by banks’ tendency to invest in later-round or larger deals, nor contributed by banks’ following successful peer IVCs. Banks’ outperformance is mainly concentrated in fin-native fintech startups and those whose business operations overlap with banks’ core business segments, which is consistent with the corporate venture capital (CVC) literature and the conjecture that banks possess unique industry expertise that facilitates their selection of fintech startups. In addition, banks participate more on the boards of fintech startups than of other ventures, implying that the better investment performance is not purely driven by selection.

Keywords: Banks; Fintech ventures; IPO (search for similar items in EconPapers)
JEL-codes: G21 G23 G24 M13 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:149:y:2023:i:c:s037842662200334x

DOI: 10.1016/j.jbankfin.2022.106754

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