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Do financial innovations influence bank performance? Evidence from China

Author

Listed:
  • Shaen Corbet
  • Yang (Greg) Hou
  • Yang Hu
  • Les Oxley
  • Mengxuan Tang

Abstract

Purpose - The rapid growth of Fintech presents a growing challenge for banking institutions, particularly those with more traditional, service backgrounds. This paper aims to examine the relationship between Fintech innovation and bank performance by exploiting novel Chinese market data. Design/methodology/approach - Guided by the work of Dietrich and Wanzenried (2011, 2014) and Phanet al.(2019), the authors construct a regression model to investigate the effect of Fintech innovation on the profitability of Chinese listed banks. The authors include their measures of Fintech innovation in each of their selected structures. Findings - Results indicate that Fintech innovation is negatively associated with bank performance and that state-owned banks, joint-stock commercial banks and long-established banks are more negatively impacted by Fintech innovation relative to city and rural commercial banks and younger banks. Originality/value - Risk tolerance levels, internal structure and efficiency and recent debt repayment performance channels are each shown to be significant, robust explanatory factors underpinning such results.

Suggested Citation

  • Shaen Corbet & Yang (Greg) Hou & Yang Hu & Les Oxley & Mengxuan Tang, 2023. "Do financial innovations influence bank performance? Evidence from China," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 41(2), pages 241-267, September.
    • Handle: RePEc:eme:sefpps:sef-02-2022-0119
    DOI: 10.1108/SEF-02-2022-0119
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