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23 pages, 1051 KiB

Open AccessArticle

Decentralized Finance (DeFi) Projects: A Study of Key Performance Indicators in Terms of DeFi Protocols’ Valuations

by Dominik Metelski and Janusz Sobieraj

Int. J. Financial Stud. 2022, 10(4), 108; https://doi.org/10.3390/ijfs10040108 - 25 Nov 2022

Cited by 11 | Viewed by 10135

Decentralized finance (DeFi) protocols use blockchain-based tools to mimic banking, investment and trading solutions and provide a viable framework that creates incentives and conditions for the development of an alternative financial services market. In this respect, they can be seen as alternative financial [...] Read more.

Decentralized finance (DeFi) protocols use blockchain-based tools to mimic banking, investment and trading solutions and provide a viable framework that creates incentives and conditions for the development of an alternative financial services market. In this respect, they can be seen as alternative financial vehicles that mitigate portfolio risk, which is particularly important at a time of increasing uncertainty in financial markets. In particular, some DeFi protocols offer an automated, low-risk way to generate returns through a “delta-neutral” trading strategy that reduces volatility. The main financial operations of DeFi protocols are implemented using appropriate algorithms, but unlike traditional finance, where issues of value and valuation are commonplace, DeFis lack a similar value-based analysis. The aim of this study is to evaluate relevant DeFi performance metrics related to the valuations of these protocols through a thorough analysis based on various scientific methods and to show what influences the valuations of these protocols. More specifically, the study identifies how DeFi protocol valuations depend on the total value locked and other performance variables, such as protocol revenue, total revenue, gross merchandise volume and inflation factor, and assesses these relationships. The study analyzes the valuations of 30 selected protocols representing three different classes of DeFi (i.e., decentralized exchanges, lending protocols and asset management) in relation to their respective performance measures. The analysis presented in the article is quantitative in nature and relies on Granger causality tests as well as the results of a fixed effects panel regression model. The results show that the valuations of DeFi protocols depend to some extent on the performance measures of these protocols under study, although the magnitude of the relationships and their directions differ for the different variables. The Granger causality test could not confirm that future DeFi protocol valuations can be effectively predicted by the TVLs of these protocols, while other directions of causality (one-way and two-way) were confirmed, e.g., a two-way causal relationship between DeFi protocol valuations and gross merchandise volume, which turned out to be the only variable that Granger-causes future DeFi protocol valuations. Full article

(This article belongs to the Special Issue The Financial Industry 4.0 Part 2)

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19 pages, 655 KiB

Open AccessArticle

FinTech Entrepreneurial Ecosystems: Exploring the Interplay between Input and Output

by Ekaterina Koroleva

Int. J. Financial Stud. 2022, 10(4), 92; https://doi.org/10.3390/ijfs10040092 - 02 Oct 2022

Cited by 4 | Viewed by 2472

Abstract

This paper aims to examine the interplay between the attributes of the FinTech ecosystem (input) and productive entrepreneurship (output) in Russian regions. A survey was used to gather data from FinTech representatives in ten selected regions located in Russia. The acquired responses allowed [...] Read more.

This paper aims to examine the interplay between the attributes of the FinTech ecosystem (input) and productive entrepreneurship (output) in Russian regions. A survey was used to gather data from FinTech representatives in ten selected regions located in Russia. The acquired responses allowed measuring the FinTech ecosystem attributes by calculating the FinTech ecosystem index. Correlation analysis was used to analyse the association between the FinTech ecosystem index and productive entrepreneurship, as measured by the number of FinTechs. Data envelopment analysis was used to determine regions with more productive entrepreneurship given the ecosystem attributes. The FinTech ecosystem index defines a similar environment in the analysed regions for financial sector entrepreneurship. The regions have high values of physical infrastructure, demand, and talent, while new knowledge and networks appear as weaknesses. Still, Moscow has the highest and Chelyabinsk the lowest FinTech ecosystem index. There appears a positive link between FinTech ecosystem attributes and productive entrepreneurship. The Moscow and Chelyabinsk regions are also revealed as the regions that effectively create an environment for productive entrepreneurship from the position of the Fintech ecosystem index. This study contributed to the existing literature by measuring FinTech ecosystem attributes and productive entrepreneurship, investigating the relationship between them and determining the territories with productive entrepreneurship. It also contributed to Russian FinTech literature by being the first to measure the environment for financial sector entrepreneurship. Full article

(This article belongs to the Special Issue The Financial Industry 4.0 Part 2)

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17 pages, 4716 KiB

Open AccessArticle

FinTech Companies: A Bibliometric Analysis

by Gencay Tepe, Umut Burak Geyikci and Fatih Mehmet Sancak

Int. J. Financial Stud. 2022, 10(1), 2; https://doi.org/10.3390/ijfs10010002 - 28 Dec 2021

Cited by 19 | Viewed by 9313

Abstract

The financial-technology industry has recently attracted the attention of many sectors. The financial-technology industry designs new and unusual technological financial services in many areas. It combines technology with finance and provides an alternative to the traditional financial system. In the scope of this [...] Read more.

The financial-technology industry has recently attracted the attention of many sectors. The financial-technology industry designs new and unusual technological financial services in many areas. It combines technology with finance and provides an alternative to the traditional financial system. In the scope of this study, 636 publications were obtained from Scopus. Various tools, such as Microsoft Excel for frequency analysis, and VOSviewer for data visualization, were used. The open-source codes used for bibliometric analysis through the R Studio program were developed by the authors and used for citation-metrics analysis. The main aim of this study was to find out the most influential studies and authors and to reveal the distributions and impacts of publications in the FinTech area between 2015 and 2021 from the Scopus database. The results indicate that the most influential journal is Sustainability Switzerland, and the most cited author is Gomber et al. Additionally, Rabbani has the most publications, while China has emerged as the most productive country. On the other hand, this study found that FinTech research clustered in four areas. These areas are computer science, business management, economics, and social sciences. This FinTech study examines financial services, financial access, and financial technology, where FinTech is at the center. It also focuses on cryptocurrency, bitcoin, and smart contracts where the blockchain is at the center. The results reveal a systematic map of existing studies. Further, the study plays a guiding role in future research. Full article

(This article belongs to the Special Issue The Financial Industry 4.0 Part 2)

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17 pages, 296 KiB

Open AccessArticle

Adverse Selection in P2P Lending: Does Peer Screening Work Efficiently?—Empirical Evidence from a P2P Platform

by Yao Wang and Zdenek Drabek

Int. J. Financial Stud. 2021, 9(4), 73; https://doi.org/10.3390/ijfs9040073 - 20 Dec 2021

Cited by 2 | Viewed by 3415

Abstract

The rapid development of online lending in the past decade, while providing convenience and efficiency, also generates large hidden credit risk for the financial system. Will removing financial intermediaries really provide more efficiency to the lending market? This paper used a large dataset [...] Read more.

The rapid development of online lending in the past decade, while providing convenience and efficiency, also generates large hidden credit risk for the financial system. Will removing financial intermediaries really provide more efficiency to the lending market? This paper used a large dataset with 251,887 loan listings from a pioneer P2P lending platform to investigate the efficiency of the credit-screening mechanism on the P2P lending platform. Our results showed the existence of a TYPE II error in the investors’ decision-making process, which indicated that the investors were predisposed to making inaccurate diagnoses of signals, and gravitated to borrowers with low creditworthiness while inadvertently screening out their counterparts with high creditworthiness. Due to the growing size of the fintech industry, this may pose a systematic risk to the financial system, necessitating regulators’ close attention. Since, investors can better diagnose soft signals, an effective and transparent enlargement of socially related soft information together with a comprehensive and independent credit bureau could mitigate adverse selection in a disintermediation environment. Full article

(This article belongs to the Special Issue The Financial Industry 4.0 Part 2)

29 pages, 522 KiB

Open AccessArticle

Information Disclosure in China’s Rising Securitization Market

by Xueer Chen and Chao Wang

Int. J. Financial Stud. 2021, 9(4), 66; https://doi.org/10.3390/ijfs9040066 - 01 Dec 2021

Cited by 1 | Viewed by 2915

Abstract

E-commerce and FinTech are currently booming in China. The growing consumer market is accompanied by internet finance, by which consumers can easily borrow money from financial institutions online. As a result, the growing risks of financial institutions are of concern to the government [...] Read more.

E-commerce and FinTech are currently booming in China. The growing consumer market is accompanied by internet finance, by which consumers can easily borrow money from financial institutions online. As a result, the growing risks of financial institutions are of concern to the government and regulatory bodies. Consequently, the securitization market in China is seeing rapid growth that could affect financial stability. Applying FinTech and emerging technologies in securitization might be an effective way to protect against these risks. This paper studies the question of whether China needs a higher standard of information transparency in order to protect against its risks against the background of digital transformation. We analyzed the determinants of securitization in the Chinese banking sector, relying on data on banks for two periods: pre-2017Q4 and post-2017Q4. The main findings of the paper demonstrate that the application of FinTech in China’s banking industry resulted in less information asymmetry. The risk exposure was the most significant determinant in general. Higher risk exposures increased securitization transaction volumes, which reflects securitization with adverse selection problems between the originator and investors. Liquidity and profitability, as important determinants indicating the moral hazard problem, also affected securitization pre-2017Q4, but liquidity and profitability were found to be unimportant determinants after the application of FinTech (the post-2017Q4 period). Moreover, this study finds that the effects of the adverse selection and moral hazard problems varied in different types of banks. Overall, our findings suggest that the Chinese securitization market needs a higher standard of information transparency. Full article

(This article belongs to the Special Issue The Financial Industry 4.0 Part 2)

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18 pages, 2278 KiB

Open AccessArticle

Did Financial Consumers Benefit from the Digital Transformation? An Empirical Investigation

by Soojin Park, Prida Erni Kesuma and Man Cho

Int. J. Financial Stud. 2021, 9(4), 57; https://doi.org/10.3390/ijfs9040057 - 18 Oct 2021

Cited by 2 | Viewed by 2820

Abstract

This study aimed to test, through empirical investigation, how the rapid advancement of digital transformation (DT) has impacted the price of financial services. To this end, we compiled a set of macro-level indicators on the aggregate outcomes of the financial services sector in [...] Read more.

This study aimed to test, through empirical investigation, how the rapid advancement of digital transformation (DT) has impacted the price of financial services. To this end, we compiled a set of macro-level indicators on the aggregate outcomes of the financial services sector in Korea over the last three decades and conducted an analysis to gauge the effects of DT on the country using those indicators. Using the ARDL-ECM (autoregressive distributed lag error-correction model), we show that, over time, the unit cost of financial intermediation in Korea has tended to move in tandem with the growth in economic output, although the profit portion of the unit cost has not exhibited a long-term relationship with the GDP trend. The long-term effect of the DT trend is negative (i.e., cost-saving) for labor input, capital expenditure, and the total unit cost of financial intermediation, which are all shown to be statistically significant. Consequently, we conclude that DT contributed to enhancing consumer benefit, mainly by achieving the operational efficiency of labor and capital, from 1990 to 2019 in Korea. From a policy perspective, our finding implies that DT-driven innovation in the sector can benefit financial customers if excessive levels of profit are restrained through market competition. Full article

(This article belongs to the Special Issue The Financial Industry 4.0 Part 2)

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16 pages, 501 KiB

Open AccessArticle

Fintech Credit and Bank Efficiency: International Evidence

by Tu D. Q. Le, Tin H. Ho, Dat T. Nguyen and Thanh Ngo

Int. J. Financial Stud. 2021, 9(3), 44; https://doi.org/10.3390/ijfs9030044 - 17 Aug 2021

Cited by 18 | Viewed by 6661

Abstract

The expansion of fintech credit around the world is challenging the global banking system. This study investigates the interrelationships between the development of fintech credit and the efficiency of banking systems in 80 countries from 2013 to 2017. The findings indicate a two-way [...] Read more.

The expansion of fintech credit around the world is challenging the global banking system. This study investigates the interrelationships between the development of fintech credit and the efficiency of banking systems in 80 countries from 2013 to 2017. The findings indicate a two-way relationship between them. More specifically, a negative relationship between bank efficiency and fintech credit implies that fintech credit is more developed in countries with less efficient banking systems. Meanwhile, a positive impact of fintech credit on the efficiency of banking systems suggests that fintech credit may serve as a wake-up call to the banking system. Therefore, fintech credit should be encouraged by the authorities around the world. Full article

(This article belongs to the Special Issue The Financial Industry 4.0 Part 2)

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Review

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21 pages, 515 KiB

Open AccessReview

Taxing the Digital Economy through Consumption Taxes (VAT) in African Countries: Possibilities, Constraints and Implications

by Favourate Y. Mpofu

Int. J. Financial Stud. 2022, 10(3), 65; https://doi.org/10.3390/ijfs10030065 - 09 Aug 2022

Cited by 4 | Viewed by 4118

Abstract

Owing to the Fourth Industrial revolution and digital transformation, the digital economy has grown substantially globally and in Africa. Despite the positive outcomes such as advancements in technology, improvements in business models and expansion in digital financial inclusion, negative implications include the erosion [...] Read more.

Owing to the Fourth Industrial revolution and digital transformation, the digital economy has grown substantially globally and in Africa. Despite the positive outcomes such as advancements in technology, improvements in business models and expansion in digital financial inclusion, negative implications include the erosion of tax bases due to the invisible nature of digital transactions. Although the digital economy is one of the biggest and quickest growing sectors in the African continent, its contribution to tax revenue is negligible. Developed and developing countries are grappling to find effective ways of mobilizing revenues from this hard to tax economy. African countries have turned to digital services taxes, value added taxes and withholding taxes in a bid to collect revenue from the digital economy to broaden their tax bases. There is intense debate among policymakers, governments, development bodies and tax bodies on the most effective way to tax the digital economy. Through a conceptual analysis based on a critical review of the literature, this article contributes to the ongoing debate by assessing the possibilities and constraints of taxing the digital economy in Africa using value added tax (VAT). The paper reviewed 55 articles, most of them current, published between 2014 and 2022, reflecting embryonic nature of the subject area. The findings on the opportunities include the existence of VAT regulation, increased revenue mobilization and efficiency gains, while challenges include ambiguities in legislation, capacity constraints and tax knowledge gaps. The implications of using VAT to collect tax from the digital economy encompass increased cost of digital services, decreased access, increased inequality and impediment on employment creation, poverty reduction, digital financial inclusion, and the realization of the sustainable development goals. Full article

(This article belongs to the Special Issue The Financial Industry 4.0 Part 2)

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