Unraveling systemic risk in FinTech companies: Influencing factors, trends, and policy imperatives

This paper presents novel empirical evidence on the systemic risk significance of U.S. FinTech companies and explores the factors influencing their systemic risk. Utilizing data from 30 FinTech firms spanning January 3, 2011, to March 31, 2023, we employ two distinct measures, Conditional Value-at-Risk (ΔCoVaR) and Marginal Expected Shortfall (MES), to assess individual firms' exposure and contribution to systemic risk. Our empirical findings reveal considerable variations in systemic risk among FinTech firms and over time. Notably, when investigating the COVID-19 pandemic's impact, our study provides compelling evidence of its role in magnifying the systemic repercussions of FinTech companies. Furthermore, our results unveil associations between systemic risk and diverse factors, including debt default risk, interconnectedness, firm size, profitability, corporate governance, liquidity, asset quality, and firm lifecycle. These findings offer valuable insights for policymakers and regulators seeking to implement proactive measures aimed at safeguarding financial stability within the FinTech sector. JEL classification: G32, G23, C58