Fintech, Diversification, Ownership and Bank Asset Quality: Evidence from Sub-Saharan Africa

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Date

2023

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University of Ghana

Abstract

Globally, the banking industry is now experiencing an upheaval due to recent advancements in Fintech. The banking industry is driven toward operational innovation by the financial technology industry's fast advancement in order to obtain a competitive, long-lasting edge. This study looked at the connection between financial technology investment and bank asset quality as well as the conditional effects of diversification and type of bank ownership. The study used the dynamic panel model estimator. The target population for the study of Fintech, diversification, ownership, and bank asset quality included banks in Sub-Saharan Africa listed on their country stock exchange markets. The research used a purposive selection approach to collect secondary data from yearly financial statements of stock exchange listed banks over a ten-year period, from 2011 to 2020. The research found a strong negative relationship between Fintech investment and bank asset quality. The study also found that the association of Fintech investment with bank asset quality is significantly moderated by diversification. Similarly, the study also found that the association of Fintech investment with bank asset quality is significantly moderated by ownership structure. The findings can become a bedrock for policy, practice, and research purposes. Discovery of this significant relationship between Fintech investment and bank asset quality suggests that policymakers should implement policies that encourage banks to increase their investment in financial technology because this will decrease NPL and in effect enhance asset quality. This would ensure optimum performing assets which guarantee growth. Bank managers should make decisions to ensure that banks invest in financial innovations and technology in order to reap the associated benefits such as improved profitability and reduced bad loans. Last, but not the least, with the intervening effect of diversification, policymakers should implement policies that enhance and promote the growth of the Fintech industry to provide an opportunity for the banks to take advantage of and enjoy the benefits. Due to the limitation of the study to exploring the impact of diversification and ownership structure on fintech and Asset quality, future studies may also consider corporate governance practice dimensions such as an independent board, size of board, gender, etc. to further explore its impact on Fintech, Asset quality and Ownership relationship.

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MPhil.Finance

Keywords

Fintech, Diversification, Ownership

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