THE TRIPLE NEXUS: CORPORATE GOVERNANCE, FINTECH ADOPTION, AND FIRM PROFITABILITY

Abstract

The literature shows that there is a triple nexus among corporate governance, FinTech adoption and firm profitability. This triple nexus is a complex one, which has not been fully understood. This study aimed to evaluate the nexus between corporate governance, FinTech adoption and firm profitability. Four hypotheses were proposed to explain this triple nexus. The required data were collected from a survey of 148 Saudi financial firms listed on the Tadawul Exchange. Descriptive analysis, correlation estimations, multiple regression analysis, moderation analysis, and structural equation modelling were done on the data. From the results of this study and discussions on them, it can be concluded that Saudi financial firms exhibit moderately high levels of governance standards and moderate levels of FinTech adoption. Most of the firms sampled have above-average financial performance. The main FinTech technologies used were digital payment systems, mobile banking platforms, and cloud computing services. These are in line with the general trend in many developing countries. There are mutual relationships between FinTech adoption, corporate governance and firm profitability. An interaction between corporate governance and FinTech adoption has been obtained. The positive relationship between corporate governance and profitability was stronger for firms with high FinTech adoption compared to those with low FinTech adoption. Corporate governance has both a direct effect and an indirect effect through FinTech adoption on firm profitability. The mediation effect of FinTech is to an extent of 36%. The banking and FinTech/technology sectors showed the strongest relationships between FinTech adoption and profitability. The combined effect of FinTech and corporate governance is more conspicuous in the case of small and medium enterprises. The findings support all four hypotheses. This means that corporate governance quality and FinTech adoption positively impact firm profitability, and FinTech mediates/moderates the relationship between corporate governance and firm profitability.