Work

Legal enforcement and fintech credit: International evidence

Year: 2023

Type: article

Abstract: Previous studies have shown that the quality of legal institutions is negatively associated with the interest rates of business loans. Fintech lending, with improved ex ante risk-sharing practices that change the approach to credit provision, presents a challenge to the traditional relationship between law and finance. Compiling and studying over five million fintech loans from 24 countries, we show that, in comparison to traditional bank loans, the quality of legal enforcement matters less to the cost of fintech credit. Nonetheless, the impact of legal protection on the interest rates of fintech credit is more persistent when (1) the loans bear higher risk, (2) the fintech platforms have fewer risk-sharing tools, and (3) borrowers’ jurisdictions have fewer information-sharing channels. Our study contributes to the debate on the role of legal protection in the fintech credit market.

Source: Journal of Empirical Finance

DOI: 10.1016/j.jempfin.2023.03.007

Authors: Hongfeng Peng, Jiao Ji, Hanwen Sun, Haofeng Xu

Institutions: Shandong University of Finance and Economics, University of Sheffield, University of Bath, Loughborough University

Language: English

Topic: FinTech, Crowdfunding, Digital Finance

Subfield: Management Information Systems

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $2,820