Christian DaumoserEquity Valuation for Financial Technology Transactions

About this book deutschenglish

The study defines FinTech as the following: “FinTech is the combination of traditional financial services with innovative, often web-based technology”. Aside from the disruption of such a traditional industry as financial services, it is the immense growth of investments and transactions that makes FinTechs such a relevant research object.

The identification of studies on value relevance of financial and non-financial information lays the ground for the development of an innovative, industry-specific valuation framework as demanded by prior research. Based on the three main aspects of financial technology (innovation, web-based technology, traditional financial services), FinTech firms are perceived as a combination of characteristics from start-ups, Internet companies, and traditional financial services firms.

The qualitative analysis applies semi-structured interviews with eight practitioners representing a specifically chosen bundle of transaction and FinTech expertise. Aside the verification of the findings from the literature review, the results of the qualitative analysis also highlight, for example, the differentiation between cost and investment characteristics of expenses, the consideration of unit/customer metrics, and the importance of management’s industry experience.

The quantitative analysis supports the superior value relevance of non-financial information in early stage transactions and of financial information in later stage transactions. Early stage FinTech firms’ equity value benefits, for example, from the top management’s financial industry experience and a higher number of monthly unique visitors. At later stages, the FinTechs’ firm values are, amongst others, driven by the available cash and respective investments for research and development.

The main result of this study is an empirically evidenced framework of non-financial and financial value drivers for FinTech firms. Practitioners and academics are provided with a starting point for valuation approaches and for future research on FinTech valuation.

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