Assessing systemic risk spillovers from FinTech to China’s financial system

Abstract

Today, the potential of FinTech in China is immense. After a prolonged period of dormancy, a blazing trail in finance surges. This study estimates the extent to which risk is transmitted from FinTech to various sub-industries within the Chinese financial sector, employing the GARCH copula quantile regression model. Our empirical findings indicate that FinTech exerts significant risk spillover effects on these financial sub-industries. Notably, at lower risk levels of 0.1 and 0.05, the securities and state-owned commercial banks sub-industries demonstrate the most substantial and least significant risk spillovers, respectively. Conversely, at the highest risk level of 0.01, the joint-stock commercial banks and securities exhibit the largest and smallest risk spillovers, respectively. Additionally, our analysis reveals that the dynamic risk spillovers for each financial sub-industry differ and reflect the influences of the stock market crash that occurred during 2015–2016. The implications of our study extend to portfolio managers and financial authorities, highlighting the importance of enhancing supervision and regulation of FinTech companies to uphold financial stability.

KEYWORDS:

• FinTech
• risk spillovers
• financial sub-industries
• GARCH copula quantile regression
• China

JEL codes:

• C58
• G21
• G23
• O53

Acknowledgements

All authors contributed equally to this article. The authors would like to extend heartfelt appreciation to the editor and anonymous reviewers for their invaluable feedback and valuable contributions.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 https://www.economist.com/finance-and-economics/2017/02/25/in-FinTech-china-shows-the-way.

2 https://ffnews.com/thought-leader/how-the-us-china-cold-war-is-spreading-to-tech/

Additional information

Funding

This work was supported by National Natural Science Foundation of China [grant number 72273106].

Notes on contributors

Maoxi Tian

Dr. Maoxi Tian is an associate professor at College of Economics & Management at Northwest A&F University, China. He received his Ph.D. in economics from Jinhe Center for Economic Research, Xi’an Jiaotong University in 2017. Dr. Tian has been an assistant professor of Economics and Finance at Northwest A&F University since 2018. He has published several peer-reviewed articles in top-ranked academic journals such as Journal of International Financial Markets, Institutions and Money, Energy Economics, North American Journal of Economics and Finance, Finance Research Letters, Annals of Operation Research and others. His research interests include financial econometrics, risk management, energy finance, and financial markets.

Rim El Khoury

Dr. Rim El Khoury is an Associate Professor of Finance at the Adnan Kassar School of Business at Lebanese American University, Lebanon, with a Ph.D. in International Finance from Sogang University, South Korea. Prior to joining Lebanese American University, she taught at Hanyang University in South Korea and American University of Technology and served as the Finance Discipline Coordinator and the chair of the assessment of the learning at Notre Dame University in Lebanon. She is the recipient of several awards such as the Outstanding Doctoral Thesis Award (2009), Grand winner for Korea Times Magazine Economic Contest (2007), and The Academic Excellence Award from the Korean Government (2006). She is also a reviewer for several prestigious academic journals, including the International Journal of Emerging Markets, Journal of Applied Accounting Research, and Journal of Financial Innovation, among others. She has guest edited special issues for journals such as Strategic Marketing, Higher Education, Skills and Work-Based Learning, and Development and Learning in Organizations. She edited books, and she published several peer-reviewed articles in top-ranked academic journals such as Journal of International Financial Markets, Institutions and Money, Borsa Istanbul Review, Small Business Economics.

Nohade Nasrallah

Nohade Nasrallah is a proactive researcher with 15 years of academic experience. She is now an associate professor at EM-Strasbourg, LaRGE research center. She is also affiliated with the Conservatoire National des Arts & Métiers (Le Cnam), France, LIRSA research center. She earned a Ph.D. in Business Administration from the Lebanese University in 2018 and a Master’s degree in Business Administration (MBA) with high distinction from Notre Dame University in 2008. She served as an assistant professor of Finance at the Faculty of Business Administration and Economics at Notre Dame University, Lebanon. In addition, she taught at the Lebanese University and La Sagesse University, Lebanon. She has extensive professional experience and worked as the chief financial manager for Lebanese SMEs. She earned an online ACCA Certificate in International Auditing (CertIA)-2019. She has published several peer-reviewed articles in top-ranked academic journals.

Muneer M. Alshater

Dr. Muneer M. Alshater, with a PhD in Fintech from UM (Qs.59) and dual master’s degrees, is a recognized finance and business expert. He crafted the first fintech program in Jordan and the Middle East and has contributed to AAOIFI standards. His work, read over 100,000 times across platforms, encompasses 35+ articles in top-tier journals (A*, A, ABS-3, SSCI) and over 100 scholarly reviews. As an Associate Editor for seven esteemed journals, Dr. Alshater persistently strives to elevate the field of finance and technology, adeptly bridging academia and industry. His insights and efforts render him a respected voice in his domain.