Research On The Spillover Effect Of Fintech Innovation Risk

The close connection between finance and technology began with the development of modern computer information technology.After the concept of "Fintech" was formally proposed in 2011,Fintech ushered in a golden period of rapid development.The Chinese government work report has repeatedly mentioned encouraging Fintech innovation to improve service efficiency.At the same time,systemic financial risks are also accumulating,which are more hidden,complex,and contagious.General Secretary Xi Jinping mentioned that strengthening the guidance and standardization of blockchain technology requires the correct and reasonable application of financial technology on the basis of good risk management and control in the 18 th collective study of the Political Bureau of the CPC Central Committee.We should recognize the two sides of Fintech innovation.On the one hand,the development of Fintech has greatly promoted the efficiency of the financial industry.On the other hand,enhancing supervision of Fintech innovation and guiding it for healthy and sustainable development is need in face of the spillover risks.Financial risks not only exist in the process of mutual transmission within traditional financial markets,but are also affected by Fintech innovation,which shortens the distance between financial markets and the technology industry.It is a key issue whether the risk transferring among markets will significantly change the level of systemic financial risks.Fintech innovation has greatly promoted the efficiency of the financial industry,but also affects the stability of the financial market.Therefore,it is necessary to “hold fast to the bottom line of not having systemic financial risks”,explore the spillover effects of Fintech innovation risks and the process of transmitting to systemic risks,make targeted regulatory recommendations.It also contributes to healthy and sustainable development of Fintech innovation when risk events occur frequently and risk measurement becomes more difficult.The article focuses on the transmission mechanism of Fintech innovation risks to systemic financial risks and the fluctuations of the three traditional financial markets,namely banking,securities and insurance,studies the spillover effects of Fintech innovation risks into traditional financial markets.Firstly,it summarizes domestic and foreign research on Fintech and financial risk transmission,and elaborates related concepts and definitions of Fintech and risk,which lays a theoretical foundation for research on the spillover effects of Fintech innovation risks by combining financial innovation theory,financial vulnerability theory and financial supervision theory.Secondly,through the analysis of the path that Fintech innovation transmitting to systemic financial risks,it is proposed that the transmission mechanism of Fintech innovation risks is mainly based on four dimensions: financial product innovation,financing method innovation,cross contagion among industries,and regulatory lag or lack.Then,it tests the correlation between Fintech innovation and systemic financial risks empirically by establishing a fixed-effect panel model with data from 28 provinces for 6 years.In addition,the GARCH-CoVaR model is used to study the spillover effect of the Fintech sector index on the traditional financial industry sector index in listed companies.The results show that,financial product innovation brought by Fintech,cross contagion of risks between technology and financial industry,regulatory lag or lack have all increased the level of systemic risks when it comes to the transmission path,while innovation in financing methods reduces the systemic financial risks;there is a significant positive spillover effect between the Fintech industry and traditional financial market when it comes to spillover effects,and the effect on the banking industry is the strongest.Finally,the conclusion corroborates the spillover effects of Fintech innovation risks,which significantly impact the level of systemic financial risks.It also provides a practical evidence for healthy and sustainable development of Fintech innovation and appropriate regulations.