FinTech Development and Bank Stability in Emerging Markets: Credit Expansion As a Transmission Channel and the Conditional Role of Corporate Governance

Ho, Tze Roe (2026) FinTech Development and Bank Stability in Emerging Markets: Credit Expansion As a Transmission Channel and the Conditional Role of Corporate Governance. Masters thesis, Tunku Abdul Rahman University of Management and Technology.

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Abstract

This study examines the relationship between fintech development and bank stability in emerging market banking systems, with particular focus on the role of credit expansion and corporate governance. Using a balanced panel dataset of 170 listed commercial banks across 11 MSCI Emerging Market economies from 2010 to 2024, the study applies panel regression techniques, including pooled ordinary least squares, fixed effects, and random effects models. Fintech development is proxied by the ratio of net intangible assets to total assets, while bank stability is measured using Z-score and non-performing loan (NPL) ratio. Credit expansion is represented by loan growth and total debt to total assets, whereas corporate governance quality is measured using ESG scores. The findings indicate that the relationship between fintech development and bank stability is conditional rather than uniform. Fintech development demonstrates a positive effect on Z-score in several baseline models, suggesting improved financial stability through enhanced efficiency and information processing. However, the relationship becomes weaker or inconsistent when credit expansion and governance variables are incorporated. The results further show that credit expansion serves as an important transmission channel, as rapid loan growth is associated with weaker stability and higher risk exposure. In addition, corporate governance significantly influences the fintech–stability relationship, although stronger governance is unexpectedly associated with lower Z-score and higher NPL ratios in several models, potentially reflecting stricter risk recognition and reporting practices. This study contributes to the literature by integrating financial intermediation theory, information asymmetry theory, competition–fragility hypothesis, and agency theory within a unified empirical framework. The findings provide practical implications for banks and regulators in balancing fintech innovation, prudent lending practices, and governance oversight to support long-term financial stability in emerging markets.