Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235420 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9050
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
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.
Subjects: 
fintech
bank performance
default risk
financial stability
JEL: 
K00
L26
O30
Document Type: 
Working Paper
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