Abstract
Contemporary literature does not offer evidence on the causal relationship of default risk and investor sentiments for FinTech sector. We bridge this gap by assessing the dynamic co-movement between Distance-to-Default of leading global FinTech firms and three uncertainty indices namely Twitter Market Uncertainty Index-ENG, Twitter Economic Uncertainty Index-ENG, and US daily news-based Economic Policy. The sample period is from 07 April 2016–30 June 2021. The estimations are performed using Wavelet based analytical framework. The results reveal high dynamic co-movement of Twitter based uncertainty indices with Distance-to-Default of FinTech firms. However, there is very little co-movement between economic policy uncertainty and FinTech firms’ stability. The novelty of this work lies in the utilization of National University of Singapore’s Distance-to-Default measure, which is available in daily frequency and capable of performing dynamic data analysis. Our results offer maiden evidence of linkage of default risk and news based uncertainty indices.
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