Interrelationships between fintech, country competitiveness, and their impact on bank efficiency and investor responses in Asia

Fintech has made the banking industry transformative worldwide, which has the potential to transform traditional business models and significantly enhance bank efficiency. When country competitiveness is high in a supportive environment, it further enhances bank efficiency. As banks become more efficient, there may be higher earnings with better growth prospects. Positive news of fintech funding boosts investor confidence and drives positive market sentiment. As a result, investors’ attitudes are positive towards stocks, driving up demand for stocks and resulting in higher stock performance. This raises a concern for low country competitiveness in the banking industry, which may have adverse consequences for bank efficiency. Also, the possible implication may be that banks are not able to fully exploit the fintech benefits compared to other regions, which may negatively impact investor sentiment and stock performance. The objectives of the study are to investigate the following: the effects of fintech on bank efficiency, how fintech affects bank efficiency with a mediating role of country competitiveness, the effects of fintech on investors’ response (stock returns), and how fintech affects bank efficiency with a moderating role of country competitiveness in Asia’s context. The sample size is 92 commercial banks across 15 countries in Asia. The study spans a seven-year period from 2016 to 2022, utilizing secondary data obtained through purposive sampling. The dataset comprises 644 observations, with yearly data collected for each bank. The estimation techniques under panel data regression have been applied using the fixed-effect (FE) model. The key findings reveal Fintech significantly (p<0.01) and positively impacts bank efficiency, with an effect size of 0.026 in objective 1. The implications may include that investing in technology may improve the bank's capability for in-house innovation. Fintech significantly (p<0.01) and positively impacts bank efficiency with an effect size of 0.029 in objective 2. Country competitiveness (p<0.01) mediates this impact, with an effect size of 0.124. In contrast to objective 3, the research finds a strong positive association (p<0.05) between fintech and stock returns (investors’ responses) with an effect size of 1.168. The implication is that banks may allocate resources towards fintech that demonstrate a commitment to leveraging technology to improve performance and drive value creation. Fintech significantly (p<0.05) and positively impacts bank stock returns with an effect size of 6.713, in contrast to objective 4. Country competitiveness has a positive effect on the impact of fintech on bank stock returns, with an effect size of 1.92 percent, and the impact was statistically significant (p<0.05). The implication is that policymakers may develop policies that support economic performance, business efficiency, and technology infrastructure as top priorities in order to increase country competitiveness.

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