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The Impact of Fintech Startups on Financial Institutions' Performance and Default Risk

Christian Haddad and Lars Hornuf

No 9050, CESifo Working Paper Series from CESifo

Abstract: We examine the impact of fintech start-ups on the performance and default risk of traditional financial institutions. We find a positive relationship between fintech start-up formations and incumbent institutions’ performance for the period 2005–2018 and a large sample of financial institutions from 87 countries. We further analyze the link between fintech start-up formations and the default risk of traditional financial institutions. Fintech start-up formations decrease stock return volatility of incumbent institutions and decrease the systemic risk exposure of financial institutions. The findings indicate that legislators and financial supervisory authorities should closely monitor the development of fintech start-ups, because fintechs not only have a positive effect on the financial sector’s performance but also can improve financial stability relative to the status quo.

Keywords: fintech; bank performance; default risk; financial stability (search for similar items in EconPapers)
JEL-codes: K00 L26 O30 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-cwa, nep-ent, nep-fdg, nep-pay, nep-rmg and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9050

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