Individual Behaviors and Technologies for Financial Innovations

395 Pages·2019·6.619 MB·English

by  Wesley Mendes-Da-Silva

Wesley Mendes-Da-Silva
Editor
Individual
Behaviors and
Technologies
for Financial
Innovations
Individual Behaviors and Technologies for Financial
Innovations
Wesley Mendes-Da-Silva
Editor
Individual Behaviors and
Technologies for Financial
Innovations
Editor
WesleyMendes-Da-Silva
SaoPauloSchoolofBusiness
Administration(FGV/EAESP)
SaoPaulo,SP,Brazil
UniversityofTexasatAustin
Austin,TX,USA
ISBN978-3-319-91910-2 ISBN978-3-319-91911-9 (eBook)
https://doi.org/10.1007/978-3-319-91911-9
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Foreword
Worldwide,theInternethasincreasinglyprovidedpredicted, aswellasunforeseen
opportunities in communication through diminishing distance, including expanded
participationinfinanciallandscapes.
New researchis needed tohelp us better understand these importantchangesin
context.Thisvolumeissuchatextasitprovidesrelevantinsightstorelevanttopics
in different regions at different levels of analysis around interactions between
individuals, technologies and financial innovations. This discussion is developed
focusing on the topic of crowdfunding and corporate finance to guanxi, students’
creditcardhabits,andbeyond.
This collection of research perspectives makes a substantial and important con-
tribution to understanding the many faceted aspects of economic patterns that
presentinsightsintomatureaswellasemergingeconomies.
Thevolumeisatoncerelevantandacademicallythorough,makingitvaluablefor
policy makers and the financial community. The methodologies are described in
detailandprovideaquintessentialguidetosolidresearchinthisfield,byincluding
different approaches that reveal data in its most salient forms. These qualities also
makeitanappropriatetextforstudentsindifferentfields,linkingfinance,psychol-
ogy,andtechnologytounderstandvarioustopicsandmethodologiesfordata-driven,
empiricalfinancialresearchinvariouscontexts.
Propositions for further research are present in each chapter, and practical sug-
gestionsforpursuingempiricalstudiesinthefieldoffinancialinnovationbasedon
theconvergenceofvariousdomainsareoffered.
TheVisitingScholarsProgramatIC2Institute,TheUniversityofTexasatAustin,
ispleasedtohavehostedProfessorWesleyMendes-Da-Silva,SãoPauloSchoolof
Business Administration of the Fundação Getulio Vargas during his research and
writing to complete this important volume on Individual Behaviors and Technolo-
giesforFinancialInnovations.
Austin,TX,USA DavidV.Gibson
v
Preface
Innovation significantly implies value creation, besides new products creation.
Emerging problems, as a consequence, need new solutions in any field. In the
context of one of the most competitive sectors, the financial industry, financial
innovation has received significant attention since the recent international 2008/
2009 economic crisis. As a result of the crisis, financial innovation has become a
focusinatimeofreevaluation.Yetdespitethisimportance,thesourcesoffinancial
innovation remain surprisingly poorly understood. Besides, at that particular
momentintime,wewitnessedtheriseoffinancialinstrumentsandinstitutionsthat
didnotevenexistattheendofthe1970s.
Financialinnovationhasbeendefinedastheactionofcreatingandpopularizing
new financial instruments as well as new financial technologies, markets, and
institutions. In recent years, economists recognized as leaders of the academic
communityhavechampionedtheideathat“financeisreallytechnologythatworks
toward reducing inequality.” Inequalities, on the other hand, have motivated crises
of diverse types around the world, with serious damages to the well-being of the
worldpopulation.Inthiscontext,financialinnovationscanhelpthesociety,notably
through new technologies that address inequality problems by offering new assets
for risk diversification, insurance that provides protection against emerging risks
(such as climate risks), and informational apparatus available for making financial
decisionsatdifferentlevelsofinterest,amongotherinnovationsthatcollaboratefor
thedemocratizationoffinance.
It isnecessarytoconsiderthat allof ushavebehaviorsshaped accordingtoour
life trajectory, which implies a set of emotions and impulses, widely studied by
neuroscienceresearchers.Andthisimpliestwosidesofourbrain:onealtruisticand
oneselfish,withwhomwelive.Thisnotionimpactsourlivesinthevariousspheres.
On a personal level, our propensity to save and spend, the choice for certain
investmentassets,thepropensitytobuyinsurance,therecurrencetofamilymembers
toborrowmoney–allemphasizereciprocalrelationships.Ontheotherhand,atthe
businesslevel,wecanbestunderstandthewillingnesstoturntofriendsandfamilyto
fund a business. And in the financial and capital markets, corporate governance
vii
viii Preface
mechanisms,includingboardcomposition,propensityforcorruption,andillegalor
unethicalbehavior,canbeanticipatedthroughtheuseoftechnologytoaddressthe
consequencesofmismanagementincompanies.
Whystudyfinancialinnovation?Theanswercouldbeassimpleasitmayseem:
becauseitcreatesvalue!Atleastthatiswhatrecentpapershaveassumedasatitle.
Butitisindeedafieldwhosecomplexityremindsusofanexcitingresearchagenda,
ranging from personal aspects to SMEs and large listed corporations, in both
developed and emerging markets – especially the last. That is, to the extent that a
country’sGDPcandepend heavilyontheindividual’sbehaviorofthecitizen,itis
understoodthatfinancialinnovationisimportantforunderstandingthebehaviorof
theeconomyattheaggregatelevel.Thatiswhythethemeoffinancialinnovationis
interesting for researchers from different areas, policy makers, and the business
community,especiallythefinancialindustry.
Facedwiththesearguments,thereisagrowingneedforabookthatsummarizes
research results and points out directions for future research. Individual Behaviors
and Technology for Financial Innovations responds to this demand by referring
relevantsocialandpsychologicalissuestothereflectionaboutfinancialinnovations,
theirantecedents,andtheirconsequencesatdifferentlevelsofanalysis,indifferent
theoretical and methodological approaches, with a particular focus on emerging
marketsbutemphasizingtherelevanceoffinancialinnovationtotheglobalcontext.
This content directly helps finance researchers interested in financial innovation,
policy makers, educators, and practitioners in the design, implementation, and
evaluationoffinancialinnovationinitiatives.
Theconnectionbetweentechnologyandfinanceisnotsomethingrecent.Finan-
cialinnovations,attheirvariouslevels,canbemoreefficientandmorecontributory
astheuseoftechnologyisorientedtowardvaluecreation.Arecentexampleisthe
fintech and crowdfunding industry, which allows democratizing finances, since it
promotes the sale of parts of a company to a broad set of investors, who would
rigorously be venture capitalists. Recent empirical evidence suggests that financial
innovationoftenincreasesthecomplexityoftransactions,resultinginopportunities
to explore questions of interest to the consumers of financialservices. Thus, in the
longterm,financialliberalizationlikelyhasnegativeeffectsanddoesnotresultinan
innovative process. However, there are also many financial innovations that have
already produced significantly positive effects, such as opportunities for venture
capital and other financial innovations that are still in the early stages of develop-
ment.Thus,researchonfinancialinnovationcanintroducenewevidencetoimpor-
tant economic issues such as financial crises, economic growth, and system
instability. Hence, there are clear opportunities for future research in this finance
subdiscipline,whetheratthecorporateleveloratthetransactionlevel.Thesetypes
of opportunities suggest that researchers interested in financial innovation can
provide valuable evidence in other areas of modern finance and help develop
financialtechnologies.
Financialinnovationenhancessustainabilityofinstitutionsandtheiroutreachto
the poor. A useful distinction between the different types of financial innovations
include:first,financialsystem/institutionalinnovations–suchinnovationscanaffect
Preface ix
the financial sector as a whole, relating to changes in business structures, to the
establishmentofnewtypesoffinancialintermediaries,ortochangesinthelegaland
supervisoryframework.Importantexamplesincludetheuseofthegroupmechanism
toretailfinancialservices,formalizinginformalfinancesystems,reducingtheaccess
barriers for women, or setting up a completely new service structure. Second,
process innovations – such innovations cover the introduction of new business
processes,leadingtoincreasedefficiency,marketexpansion,etc.Examplesinclude
officeautomationanduseofcomputerswithaccountingandclientdatamanagement
software.Third,productinnovations–suchinnovationsincludetheintroductionof
new credit, deposit, insurance, leasing, hire purchase, and other financial products.
Productinnovationsareintroducedtorespondbettertochangesinmarketdemandor
toimprovetheefficiencyofthemarket.
While this agenda has been transformed in recent years, it has never failed to
consider what was already pointed to at the end of the 1980s. An example of this
movement is the growing interest in new financial products that will help solve
emerging problems, such as climate change and the ever-accelerating aging of the
population. The explicit and growing speed of the spread of new technologies has
also led to the emergence of innovation in the field of finance. Topics like
blockchain, Internet of Things (IoT), semantic computing, and Big Data Finance
are motivatingthe reconstruction of financial tools that translate into new financial
mechanisms that are in their maturing phase. One of the main motivations put
forwardbythefinancecommunitytowriteaboutfinancialinnovationistoprovide
argumentsforfinancialindustryprofessionalsnottoapologize,buttoassumetheir
personalresponsibilityaswellastheirroleinpromotingmarketefficiency.
Allthechaptersarebasedonworkconductedbyexperiencedandknowledgeable
researcherswhoareactiveinmultidisciplinaryresearchinfinancialinnovation.They
contributedwith chaptersthat provideanoverviewofthecurrentresearch.Ineach
chaptertheseauthorsinitiallypresenttherelevantliteratureregardingthetopicofthe
discussion, in order to attest the research status. In addition, the authors compile
searchresultsandmakethemaccessibletopeoplenotnecessarilyexpertsinthefield.
Giventheparticularrelevancethatfinancialinnovationshaveforemergingmarkets,
as well as their relevance to global stability, we discuss financial innovation from
emerging market evidence. As a result of this, we understand that discussing and
pointingoutaresearchagendaaboutfinancialinnovationwithafocusonemerging
markets is an important element in the international research agenda, given the
notionthatfinanceisreallyatechnologythatworkstowardreducinginequality.
The book is organized in three parts, with 16 chapters.Part I has eight chapters
thatreviewtheresearchongenderdifferencesinattitudesaboutriskandpropensity
to purchase automobile insurance, financial literacy models for college students,
wellness and attitude of university students in the use of credit cards, impact of
programsonincomedistributionandpropensitytoremaininemployment,financial
literacyandpropensitytoresorttoinformalfinancingchannels,andriskbehaviorin
the use of credit cards by students. Part II reviews the research on financing for
startups and SMEs, exploring funding through crowdfunding platform, operating
creditunions,andusingnetworksoffriendstofinancesmallbusinessesoutsidethe
x Preface
domestic market. The four chapters of Part III describe the contexts of financial
innovationinlistedcompanies,includingsociety’sdemandsontheirbehavior–we
discussmotivationsforcompaniestoparticipateincorporatesustainabilityindexes,
corporateperformancethroughtheirprofileofsociallyresponsibleinvestments,the
influenceofnetworksofsocialrelationsintheformationofboards,andmanagement
ofcompanies,andalsotheprecariousnessoffinancialdecisionsinlargecompanies,
aswellastheroleoftheinternetincorporatecommunicationwiththemarket.
This volume is the first to offer a comprehensive picture of research on the
relevanceofindividualbehaviorandtechnologytofinancialinnovations.Therefore,
itrepresentsacontributiontotheliterature,insofarasitpresentsthebasisonwhich
qualityresearchonfinancialinnovationcanbedeveloped.Thebookalsocontributes
to providing useful information to researchers and policy makers interested in
initiativesthathavethepotentialtoreduceinequalitiesandincreasepeople’squality
of life and well-being. Overall, the book contributes to the literature on finance,
business,humandevelopment,technology,andrelatedfields.
Austin,TX,USA WesleyMendes-Da-Silva
Acknowledgments
This book is one of the results of years of research on financial innovations and
relatedtopics,whereseveralpeople,institutions,andorganizationsareworthytobe
acknowledgedfortheirsupport,comments,andespeciallycooperation.Iappreciate
the financial support and endorsement from the São Paulo Research Foundation
(FAPESP) and National Council for Scientific and Technological Development
(CNPq). I wish to acknowledge the IC2 Institute of The University of Texas at
Austin for its unrestricted support in the development of this work, as well as the
School of Business Administration of São Paulo of Fundação Getulio Vargas
(FGV/EAESP). A special mention is given to my colleagues from FGV/EAESP,
The University of Texas at Austin, Marriott School of Management at Brigham
Young University, and the University of Georgia: Arthur Ridolfo Neto, Bruce
Kellison,CesarCaselani,DavidV.Gibson,FabioG.Garcia,GregoryPogue,João
C.Douat,JoséEvaristo,LuizA.L.Brito,MariaT.L.Fleury,OscarMalvessi,Paulo
R.S. Terra, Rafael R. Schiozer, Rodrigo Bandeira de Mello, Samy Dana, Tales
Andreassi,TedChristensen,andWalterFernandoAraújodeMoraes.
Moreover,Iacknowledge some colleagues from other universitieswithwhomI
have had the pleasure to work, whose conversations, comments, and presentations
providedpreciousinsightsforthisvolume:amongothers,AbrahamYu,University
of São Paulo; Alexandre Silveira, FECAP; André Oda, University of São Paulo;
Andrea Minardi, Insper; Antonio Lopo Martinez, FUCAPE; Carlo Drago, Univer-
sity of Rome; Celso Roberto Perez, Federal University of Santa Catarina; Cesar
Cruz, Federal University of São Carlos; Cesare Fracassi, McCombs School of
Business/The University of Texas at Austin; Cristiana Leal, University of Minho;
Dany Rogers, Federal University of Uberlândia; David Wood, Marriott School of
Management at BYU; Denísio Liberato, FAAP; Denize Grzybovski, University of
PassoFundo;EdisonSimoni,FECAP;ElinMeretheOftedal,UniversityofTromsø;
FabioFrezatti,UniversityofSãoPaulo;FernandoMoreira,UniversityofEdinburgh;
Flávio Hourneaux Junior, University of São Paulo; Florêncio Absalão, FIR;
Francisco Cassano, Mackenzie Presbyterian University; Franz Fuerst, University
ofCambridge;FuadG.Sobrinho,SDPS;GilneiLuizdeMoura,FederalUniversity
xi