The impact of FinTech on financial sustainability in the GCC: A comparative study of FinTech and non-FinTech companies

Purpose: This study aims to fill the research gap in measuring financial sustainability by developing a composite index (FSI) that combines financial performance, risk management, and liquidity measures. The study examines the impact of firm type, return on assets, leverage, earnings per share, firm size, GDP, and inflation rates on the financial sustainability of financial and non-financial firms in the Gulf Cooperation Council (GCC) countries. Design/Method/Approach: This study quantitatively analyzed the impact of the chosen characteristics of firms in the Kingdom of Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Oman, and Bahrain. Financial sustainability index (FSI), formed from Capital Adequacy Ratio (CAR), Return on Equity (ROE), Non-Performing Loans Ratio (NPL), Liquidity Ratio, Debt to Deposits Ratio, Cost-to-Income Ratio, and Loan Loss Reserves Ratio, was used in this study. Findings: The results highlighted that EPS, leverage, and return on assets had a significant influence on financial sustainability. As for the effect, EPS and leverage can be associated with the growth of sustainability of companies. At the same time, the last-in-named factor decreases financial sustainability of non-financial firms. It is admitted that financial companies demonstrate a lower level of financial sustainability and return on asset, and these are more leveraged and have a higher EPS. Firm size, GDP, and inflation demonstrated a different impact in the mentioned context. The interaction of the return on assets with a firm’s size contributed to a decrease in financial sustainability. In turn, the interaction of the mentioned factors with leverage and EPS tends to increase financial sustainability. Inflation influences and leads to a decrease in financial sustainability. Originality/Value: This study makes an original contribution by developing a new index to measure financial sustainability, providing a more comprehensive approach than previous studies that focused on separate variables. It also provides an advanced analysis of the relationship between internal and external factors and their impact on financial sustainability, as long as a new framework can be applied to other markets.