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

48 Pages Posted: 5 May 2021

See all articles by Christian Haddad

Christian Haddad

Univ. Lille, SKEMA Business School, EA4112 - LSMRC

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics; Max Planck Institute for Innovation and Competition; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: 2021

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.

JEL Classification: K000, L260, O300

Suggested Citation

Haddad, Christian and Hornuf, Lars, The Impact of Fintech Startups on Financial Institutions' Performance and Default Risk (2021). Available at SSRN: https://ssrn.com/abstract=3837778 or http://dx.doi.org/10.2139/ssrn.3837778

Christian Haddad (Contact Author)

Univ. Lille, SKEMA Business School, EA4112 - LSMRC ( email )

Avenue Willy Brandt, Euralille
Lille, 59777
France

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany
+49 89 20348619 (Phone)

HOME PAGE: http://www.hornuf.com

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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