THE EFFECT OF FINTECH FINANCIAL ACTIVITIES ON PUBLISHED NORDIC BANKS’ STOCK RETURNS

Abstract

The development of technology and digitalization plays an important role in the transformation of the banking industry and financial institutions. The recent rapid growth of financial technology, or “fintech”, increases concerns about its effect on the stock market. Accordingly, the purpose of this study is to contribute to the existing literature by investigating the impact of fintech activities on Nordic banks’ stock performance. The research is conducted by analyzing whether fintech funding influences the stock performance of 48 published Nordic banks from January 2015 through July 2021. By applying the Fama-French five factor model and additionally controlling for several fintech related funding variables (fintech funding amount, fintech funding deals, and venture capital funding type) an analysis is performed in order to establish their effect on 48 stocks. In addition, three effect control specifications are applied to the model: (1) including no bank fixed effect, (2) with bank fixed effect, and (3) with bank and month fixed effect. The principle empirical results reveal that, during the research period, fintech funding amount has a positive impact on the stock returns of the Nordic banks analyzed, but fintech deal funding has no impact. Furthermore, the type of venture capital funding does not significantly affect stock returns. Overall, the results indicate that there are no significant impacts of fintech financial activities on the analyzed banks.