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How does fintech affect bank risk? A perspective based on financialized transfer of government implicit debt risk

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  • Wang, Jiaxin
  • Huang, Xiang
  • Gu, Qiankun
  • Song, Zilong
  • Sun, Ruiyi

Abstract

The relationship between government implicit debt risk and bank risk has drawn much academic attention. Prior studies have documented the mixed effect of fintech on financial stability, and little attention has been paid to its impact in the presence of government implicit debt risk. This paper investigates the impact of fintech on the transfer of governments' implicit debt risk to commercial banks using bank-level data of Chinese commercial banks from 2014 to 2019. With manually collected financial blockchain policy data, we find that the financial blockchain curbs the spillover of government implicit debt risk to commercial banks. The widening of LGFVs financing channels and generation of the real economic effects are proven to be two crucial mechanisms. Inhibitory effects are heterogeneous between different levels of regional financial and digital economic development and officials’ promotion pressure. This study provides new insights for policymakers to develop fintech and strengthen government debt governance.

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  • Wang, Jiaxin & Huang, Xiang & Gu, Qiankun & Song, Zilong & Sun, Ruiyi, 2023. "How does fintech affect bank risk? A perspective based on financialized transfer of government implicit debt risk," Economic Modelling, Elsevier, vol. 128(C).
    • Handle: RePEc:eee:ecmode:v:128:y:2023:i:c:s0264999323003103
    DOI: 10.1016/j.econmod.2023.106498
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    More about this item

    Keywords

    Financial blockchain; Government implicit debt; LGFVs financing channels; Real economic effect;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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