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Fintech and Financial Risks of Systemically Important Commercial Banks in China: An Inverted U-Shaped Relationship

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  • Baomin Chen

    (School of Business, Nanjing University, Nanjing 210093, China)

  • Xinyun Yang

    (School of Business, Nanjing University, Nanjing 210093, China)

  • Zhenzhong Ma

    (School of Business, Nanjing Audit University, Nanjing 210017, China
    Odette School of Business, University of Windsor, Windsor, ON N9B 3P4, Canada)

Abstract

The past decade has seen impressive developments in financial technology (FinTech) in China. As a new technology and innovative method that competes with, and also supplements, traditional financial methods, fintech has had a significant impact on traditional financial businesses and has thus challenged the role of commercial banks as credit intermediaries in the financial sector. This paper examines the potential risks that fintech brings to commercial banks in China, and collects data from 19 systemically important banks from 2011–2020 to analyze the effect of fintech development on commercial banks’ financial risks in order to achieve sustainable development in the financial sector. Using the Z value and non-performing loan ratio as the criterion variables, this study shows that the impact of fintech on the financial risks of systemically important banks demonstrates an inverted U-shaped pattern, with the financial risk increasing first and then decreasing alongside the further development of fintech. The results also show that commercial banks’ responses to fintech development has been comparatively slow. Managerial suggestions are then discussed on risk supervision for commercial banks and the financial sector in China and other emerging markets.

Suggested Citation

  • Baomin Chen & Xinyun Yang & Zhenzhong Ma, 2022. "Fintech and Financial Risks of Systemically Important Commercial Banks in China: An Inverted U-Shaped Relationship," Sustainability, MDPI, vol. 14(10), pages 1-20, May.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:10:p:5912-:d:814795
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    References listed on IDEAS

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    Cited by:

    1. Wu, Xin & Jin, Tianhe & Yang, Keng & Qi, Hanying, 2023. "The impact of bank FinTech on commercial banks' risk-taking in China," International Review of Financial Analysis, Elsevier, vol. 90(C).
    2. Niu, Juanjuan & He, Jun & He, Yiqun, 2024. "Harnessing FinTech for sustainable mineral development with innovative financing strategies in China," Resources Policy, Elsevier, vol. 90(C).
    3. Zhang, Yujin & Ye, Shujun & Liu, Jie & Du, Lihong, 2023. "Impact of the development of FinTech by commercial banks on bank credit risk," Finance Research Letters, Elsevier, vol. 55(PA).
    4. Wang, Nan & Wang, Liya & Ma, Zhenzhong & Wang, Shouyang, 2022. "From knowledge seeking to knowledge contribution: A social capital perspective on knowledge sharing behaviors in online Q&A communities," Technological Forecasting and Social Change, Elsevier, vol. 182(C).

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