Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/327188 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Innovation & Knowledge (JIK) [ISSN:] 2444-569X [Volume:] 7 [Issue:] 3 [Article No.:] 100219 [Year:] 2022 [Pages:] 1-14
Publisher: 
Elsevier, Amsterdam
Abstract: 
In the context of developing FinTech innovation, a commercial bank's use of FinTech innovation can improve its risk management capability, thereby reducing its risk-taking. This paper explores the impact and mechanism of a bank's FinTech innovation on its risk-taking using panel data of 65 commercial banks between 2008 and 2020. We innovatively construct a bank-level index based on web crawler technology and obtain the annual numbers of news items about a bank's FinTech innovation from each bank in Baidu News. The empirical results show that improvement in the bank's FinTech innovation significantly reduces its risk-taking. To overcome endogenous problems, including measurement errors and omitted variables, we use the instrumental variables (IV) and difference-in-differences (DID) methods to test the hypothesis and obtain consistent estimated results. The mechanism analysis shows that banks rely on FinTech innovation to reduce their risk-taking by improving their operating income and capital adequacy ratio, optimizing their operating performance, and improving their risk control capabilities. Further, a heterogeneity analysis shows that the effect of a bank's FinTech innovation in reducing its risk-taking is more pronounced in larger, state-owned, joint-stock, and highly-competitive commercial banks. Our research results still hold after a series of robustness tests, including changing the construction methods of the bank's FinTech innovation index, replacing the bank's risk-taking indicators, tail-shrinking treatment, and changing samples. Our findings provide micro evidence for the application of FinTech innovation in commercial banks to reduce their risk-taking.
Subjects: 
Commercial banks
Risk-taking
Capital adequacy ratio
China's banking industry
FinTech innovation
Operating income
JEL: 
G21
N25
O14
O33
P34
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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