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Abstract
This dissertation studies the unexpected equilibrium effects of efficiency improvements in the financial sector. Chapter 1 focuses on the increase in speculators’ information acquisition efficiency in stock markets, while Chapters 2 and 3 look at the FinTech disruption in credit markets. Chapter 1 investigates the influence of the decrease in speculators’ information acquisition costs on corporate real efficiency within a model where firms learn from stocks and speculators’ information acquisition consumes their attention. It shows that, when information is inexpensive, speculators will use up attention. Then, decreasing speculators’ information costs can reduce corporate efficiency and social welfare. Chapter 2 studies how information technology (IT) improvements affect lender competition, entrepreneurs’ investment, and welfare in a spatial model. The effects of an IT improvement depend on whether it weakens the influence of lender–borrower distance on monitoring costs. If it does, it has a hump-shaped effect on entrepreneurs’ investment and social welfare. If not, competition intensity does not vary, improving lender profits, entrepreneurs’ investment, and social welfare. Chapter 3 studies fintech entry and how it affects competition, investment, and welfare in a spatial model. It shows that fintechs with inferior monitoring efficiency can successfully enter because of their superior flexibility iii in pricing. As a result, fintech borrowers are more likely to default than bank borrowers with similar characteristics. Fintech entry may induce banks’ exit and reduce investment; however, it will increase investment if inter-fintech competition is intense enough. Fintech entry will improve welfare if fintechs have high monitoring efficiency and inter-fintech competition intensity is intermediate.