The effect of FinTech investments on listed banks: Evidence from an Italian sample

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

This paper analyses whether and how investments in financial technology (FinTech) affect performance, risk, and value of listed Italian banks. This paper tests the effect of return on equity (ROE) and capital asset pricing model (CAPM) Beta coefficient — and, secondly, of the price-to-book value (PBV) ratio, on a sample of 17 Italian listed banks from 2013 to 2019, representing the largest institutions operating in the Italian banking industry. The FinTech variable is declined into two different statuses: digital active banks and digital-focused banks. The study adds useful insights to the positive effects of innovation on banks’ value, in a market, like the Italian one, where investments in FinTech have spread in recent years. Controlling for other financial statements and market variables, the presence of FinTech investments does not affect the CAPM Beta coefficient, while the relationship is positive and significant with ROE for digital active banks only, and with the PBV for digital-focused banks. These results confirm a positive effect on performance for banks investing in FinTech, while greater expectations from investors and a positive effect on bank value creation are significant for digital-focused banks only.

Keywords: Bank, FinTech, Performance, Risk, Value

Authors’ individual contribution: Conceptualization — F.B. and G.Z.; Methodology — F.B.; Software — L.G.; Validation — F.B., G.Z., and L.G.; Formal Analysis — L.G.; Investigation — F.B.; Resources — F.B.; Data Curation — L.G.; Writing — Original Draft — F.B.; Writing — Review & Editing — F.B. and G.Z.; Visualization — G.Z.; Supervision — F.B.; Project Administration — F.B.; Funding Acquisition— F.B.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G20, G21, G29

Received: 09.05.2022
Accepted: 12.07.2022
Published online: 14.07.2022

How to cite this paper: Beltrame, F., Zorzi, G., & Grassetti, L. (2022). The effect of FinTech investments on listed banks: Evidence from an Italian sample. Risk Governance and Control: Financial Markets & Institutions, 12(2), 47–55. https://doi.org/10.22495/rgcv12i2p4