Does FinTech matter for rigidity and risk aversion among incumbent firms?

Kwaku Alex Gyan, Peter Galvin and Peter Adjei-Bamfo

Pacific-Basin Finance Journal, 2025, vol. 92, issue C

Abstract: Incumbent firms tend to seek less growth opportunities and are more risk-averse based on their core rigidities – premised on a behaviour of prioritising efficiency associated with improving existing processes. Recently, some firms have adopted FinTech to reduce core rigidity and advance their agility towards risk-taking. However, available research has not fully deconstructed FinTech's effect on the rigidity-risk relationship. We examine this observation among incumbent traditional financial services firms in Australia using both logit regression and fixed effect ordinary least squares. Our findings indicate that FinTech's impact on rigidity could be directional and counterproductive. While predictive FinTech (i.e., algorithmic routines in bigdata finance) facilitates a reduction of rigidity and increases risk-taking propensity but reduces bankruptcy risk, efficiency-driven FinTech (i.e., blockchain smart contracts) further reinforces core rigidity among incumbent firms and reduces both risk-taking propensity and bankruptcy risk. The study results define firms' behaviour where optimal focus on creating efficiency generates rigidity while efforts to predict uncertainties in the market environment minimise rigidity. These findings largely support our hypotheses, and we discuss the implications for firm investment and strategic risk management policy and practice.

Keywords: FinTech; Investment rigidity; Strategy; Risk-taking propensity; Bankruptcy risk (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:92:y:2025:i:c:s0927538x25001556

DOI: 10.1016/j.pacfin.2025.102818

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