Does electronic economics matter to financial technology firms?

Abstract

This paper addresses the notion of electronic economics by examining financial technology (fintech) firms' performance and corporate governance quality, using data from the United States. The findings support our maintained assumption that due to the economics of electronic platforms perused by financial technology firms, these firms outperform firms from other industries (non-Fintech). The final sample comprises 1,712 company-year observations between 2010 and 2019 (pre-COVID-19). The evidence suggests that our corporate governance quality index, developed from Organisation of Economic Cooperation and Development (www.oecd.org/corporate/corporate-governance-factbook.htm, 2019) guidelines, accurately captures corporate governance quality in the United States, principally due to the inclusion of an anti-bribery policy indicator, in the index. The results suggest that this evidence is not merely an artefact due to the corporate governance quality index potentially capturing priced risk factors. Our findings reveal that fintech firms have superior corporate governance quality than non-fintech and that fintech firms place more reliance on internal versus external corporate governance mechanisms, vis-a-vis companies in other industries.