Research On The Effectiveness Of Commercial Banks Cooperating With Technology Firms To Develop Fintech

Under the increasingly strict regulatory environment,more and more technology companies have started to position themselves as technology firms rather than financial firms,while commercial banks have taken the initiative to develop financial technology(Fintech).In reality,besides the mode of establishing Fintech subsidiaries by few national large banks,the cooperation with technology companies has become a main mode for regional commercial banks to develop Fintech.In response to the flourishing cooperation practices between commercial banks and technology companies,the focus of existing literature is to discuss the influence of Fintech development on traditional banks,and few literature have examined the enabling effect of Fintech on commercial banks.However,there is a lack of research on the effectiveness and the mechanism for commercial banks that develop Fintech by cooperating with technology companies,which is crucial for guiding commercial banks to choose appropriate mode of developing Fintech and for regulators to implement effective regulations.Starting with introducing research background,literature review,and the analysis of the Fintech development status in banking industry,this thesis manually collected data on the cooperation between commercial banks and technology companies,and established a panel dataset of 334 regional banks from 2011 to 2019.Using a PSM-DID model,the thesis empirically examined the effect of the cooperation with technology companies on commercial banks’ performance and then conducted mechanism test from a perspective of principal-agent problem stylized by the cooperation in joint loan business.Finally,the impact of the cooperation on banks’ loan allocation decision on retail loan and real loan is investigated.The findings show that,on the whole,the cooperation reduces the bank’s return on assets(ROA),increases the non-performing loan ratio(NPL)and has no significant positive effect on operating incomes,which are robust for conducting numerous robustness tests and different attempts to mitigate endogeneity concerns.Further tests on the principle-agency mechanism suggest that,the negative effects of the cooperation are more pronounced for the technology company(acting as an agent)with own loan business or having cooperated with multiple banks simultaneously,and for the bank(acting as a principal)with weak Fintech capability or low power in cooperation.Furthermore,by comparing the outcome of business cooperation and that of technical cooperation,the results suggest that the agency problem mainly arises from the business cooperation stylized by joint loan,while the technical cooperation that can significantly improve the bank’s Fintech capability has no negative impact on bank performance.In terms of the effects of the cooperation on bank loan allocation,the cooperation stylized by joint loan has a boosting effect on banks’ retail loans,but it would reduce significantly real loans,which implies that real loans are suppressed by the boosting retail loans under the cooperation mode.Heterogeneity analysis indicate that the boosting effect of the cooperation on banks’ retail loans is more pronounced for banks with high proportion of retail loans and low proportion of corporate loans in their business and for banks early implementing retail transformation,as well as in regions with slow economic growth,low industrial share of GDP and high ratio of loan balances to deposit balances in urban financial institutions.