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Legal enforcement and fintech credit: International evidence

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journal contribution
posted on 2023-03-30, 13:32 authored by Hongfeng Peng, Jiao Ji, Hanwen Sun, Haofeng XuHaofeng Xu

Previous studies have shown that the quality of legal institutions is negatively associated with the interest rates of business loans. Fintech lending, with improved ex ante risk-sharing practices that change the approach to credit provision, presents a challenge to the traditional relationship between law and finance. Compiling and studying over five million fintech loans from 24 countries, we show that, in comparison to traditional bank loans, the quality of legal enforcement matters less to the cost of fintech credit. Nonetheless, the impact of legal protection on the interest rates of fintech credit is more persistent when (1) the loans bear higher risk, (2) the fintech platforms have fewer risk-sharing tools, and (3) borrowers’ jurisdictions have fewer information-sharing channels. Our study contributes to the debate on the role of legal protection in the fintech credit market. 

Funding

National Natural Science Foundation of China (72273073)

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of Empirical Finance

Volume

72

Issue

2023

Pages

214-231

Publisher

Elsevier

Version

  • VoR (Version of Record)

Rights holder

© The Author(s).

Publisher statement

This is an Open Access Article. It is published by Elsevier under the Creative Commons Attribution 4.0 International Licence (CC BY). Full details of this licence are available at: http://creativecommons.org/licenses/by/4.0/

Acceptance date

2023-03-04

Publication date

2023-03-11

Copyright date

2023

ISSN

0927-5398

eISSN

1879-1727

Language

  • en

Depositor

Dr Haofeng Xu. Deposit date: 23 March 2023

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