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Tail risk and systemic risk of finance and technology (FinTech) firms

Chaudhry, S.M., Ahmed, R., Huynh, T.L.D., Benjasak, C. (2021) Tail risk and systemic risk of finance and technology (FinTech) firms. Technological Forecasting and Social Change, 174 . Article Number 121191. ISSN 0040-1625. (doi:10.1016/j.techfore.2021.121191) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:96228)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL:
https://doi.org/10.1016/j.techfore.2021.121191

Abstract

Technology firms are increasingly moving to finance. They are able to make use of a large stock of user data and offer a range of services that otherwise were not possible. This move may pose fresh challenges to financial stability. This paper empirically evaluates the tail risk and systemic risk of technology firms. Our data sample consists of technology firms, and for comparison we also evaluate the tail risk and systemic risk of finance firms. We use daily equity returns data from 2 April 1992 to 31 December 2019 and we adopt the univariate extreme value theory (EVT) to determine equity tail risk. Our selection criteria is the market capitalisation and we choose the top twenty technology and the top twenty finance firms to evaluate tail risk and systemic risk. We found that the tail risk of technology firms is higher than the financial firms, whereas they are less likely to be in distress conditional upon a shock from the system. However, this finding for technology firms reverses when we use recent data via our six-year rolling estimates. We conclude that, similar to finance firms, there should be tighter regulations for technology firms since technology firms are riskier than the finance firms. Our paper has significant implications for both national and global financial regulators.

Item Type: Article
DOI/Identification number: 10.1016/j.techfore.2021.121191
Uncontrolled keywords: Asymptotic dependence; Data sample; Extreme value theory; Financial stability; Multivariate extreme value theory; Multivariate extremes; Systemic risks; Technological change; Technology; User data, Finance, banking; empirical analysis; multivariate analysis; risk assessment; technological change
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Depositing User: Rizwan Ahmed
Date Deposited: 16 Aug 2022 11:14 UTC
Last Modified: 17 Aug 2022 09:59 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/96228 (The current URI for this page, for reference purposes)

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