Big data in finance and the growth of large firms

Abstract

This paper was prepared for the Carnegie-Rochester-NYU conference. We thank the conference committee for their support of this work. We also thank Nic Kozeniauskas for his valuable assistance with the data and Adam Lee for his outstanding research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w24550.ack NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Current landscape and influence of big data on finance

“…The above discussion based on different area of business. Whatever, some studies (such as [6,11,14,22,23,41,45,54,68,71,73,75,83,85] focused different perspectives of financial services. Still, the contribution on this area is not expanded.…”

Big Data Manifestation in Municipal Waste Management and Cryptocurrency Sectors: Positive and Negative Implementation Factors

“…Although the definition of big data has existed in scientific literature for over 15 years, recently, scientists have been actively involved in big data adaptation for specific sectors. Technological development and further scientific studies deliberate on big data adoption challenges and opportunities in medicine [18], and the financial system [19][20][21]. Taking into account the importance of global warming and the importance of waste management, there is a pressing need to improve global waste management.…”

“…Big data outcome: Farboodi et al [21], who analysed big data and finance, found that the "growing amount of data reduces the uncertainty of investing in a given firm", therefore, in the long run, the access to big data processing would influence company development and speed up the process of decision-making. According to Begenau et al [19], due to the development of big data technology, a new class of online investment firms using big data to facilitate capital generation has emerged. According to the authors, there is also an inclination that big data would most likely influence the weight of small and medium enterprises and large companies in the economy.…”

The Economics and Implications of Data

“…Let us begin by considering the case for data proliferation delivering growth by improving the efficiency of the financial markets. Begenau, Farboodi, and Veldkamp (2018) model the proliferation of data as a means of reducing information asymmetries between a lender and borrower, and thus the cost of financing. The more public data is generated by a firm during its operations, the less uncertainty a potential creditor faces about that firm's future cashflow and creditworthiness, and the better the lender can monitor the firm after the loan has been extended.…”

“…Importantly, the efficiency gains from improved data availability in finance may be unevenly shared across borrowing firms within an industry. Begenau, Farboodi, and Veldkamp (2018) argue that the emergence of big data in the financial sector benefits larger incumbent firms more than small firms, who produce less data. This differential impact on the cost of finance contributes to increasing returns to scale as larger firms generate more data, lowering their cost to finance expansion, which in turns generates more data.…”