Does FinTech credit affect firms’ cost of capital and capital structure?

Abstract

This paper explores the effect of FinTech credit on firms’ cost of capital and capital structure. Based on a sample of 3,491 non-financial firms operating in 38 OECD countries during the period 2015–2021, we estimate that the economic effect of FinTech credit is approximately 17% on the cost of debt, and 9.5% on the cost of equity. In terms of cost of capital and capital structure, we observe a smaller yet economically significant reduction by around 5.5% and 3%, respectively. We also find that FinTech credit affects especially firms with stakeholders’ oriented corporate governance practices, which operate in countries with higher bank market power and in more innovative industries. Finally, using a Difference-in-Difference model built around the COVID-19 outbreak, our evidence suggests that these effects are robust and hold also in time of crisis when the cost of capital generally increases due to the greater economic uncertainty.