Conceptualising the Corporate Governance Issues of Fintech Firms

The board of directors plays a vital role in reducing the divergence of interest, which effectively alleviates agency problems. This study aims to highlight the current corporate governance issues which Fintech firms are facing. This line of enquiry is necessary as a majority of Fintech firms are collaborating with the listed firms, and quality corporate governance is vital to protect the shareholders’ rights. Fintech governance structure faces four key challenges: lack of anti-misconduct policy, CEO duality, over-boarded directors, and the inability of audit firms to detect fraud. Organization for Economic Co-operation and Development (OECD) provides a guideline for corporate governance, suggesting that anti-misconduct policy is a sign of better governance. The agency theory postulates that concentration of power weakens corporate governance mechanism; thereby, CEO duality and over-boarded directors are the indicators of weak governance. Also, the supervisory structure of Fintech firms is different than counterparts, which hinder the audit firms to deduct any financial misstatement. Based on the literature, we find that the Fintech firms lack anti-bribery policy and prone to have CEO duality, over-boarded directors and audit firms’ failure to detect fraud. It implies that the Fintech firms have embedded weak governance mechanisms, which will expropriate the shareholders’ right after the listed firms’ collaboration. The governance issues are not merely a technical issue of the Fintech firms, as it may cause financial instability across the world.