Loading...
Please wait, while we are loading the content...
Similar Documents
Lenders and Borrowers' Strategies in Online Peer-to-Peer Lending Market: An Empirical Analysis of Ppdai.com
| Content Provider | Semantic Scholar |
|---|---|
| Author | Feng, Yan Fan, Xinlu Yoon, Yeujun |
| Copyright Year | 2015 |
| Abstract | ABSTRACTWe investigate key factors affecting lenders' bidding strategies using three measurements for the popularity of loans: funding success, number of bids, and funding time. Also, we analyze borrowers' strategy in three groups according to the level of their expertise of online Peer-to-Peer lending: novice borrowers, pure borrowers, and mixed borrowers (as both borrower and lender). We use data from PPDai and find unanimous support for the interest rate, but partial evidence for the loan amount and the loan period. Particularly, we find that a larger loan amount could increase the probability of funding and attract more lenders. This implies that different lenders' strategies exist in the Chinese online P2P market where reliable individual credit information is unavailable. Information related to credit shows significant impact on all three measurements of the loan popularity. For borrowers, we find that different types of borrowers emphasize different components when designing a loan: mixed borrowers seem to put more weight on loan period while pure borrowers consider interest rate and loan amount more. Borrowers who have more expertise tend to propose a loan at a relatively lower cost. Our findings also suggest that Chinese borrowers, especially mixed borrowers, tend to utilize higher credibility to seek larger loans instead of lowering the cost of a loan.Keywords: Online P2P lending; Lender strategy; Borrower strategy; Borrower types; PPDai(ProQuest: ... denotes formulae omitted.)1. IntroductionThe peer-to-peer (P2P) lending concept is not at all new in itself, where lenders lend money to borrowers without an intermediary party involved [Herrero-Lopez 2009] .1 With the growth of the volume for e-commerce and the expansion of the online community, online P2P lending gains popularity as a convenient way of financing and probably a better alternative to the traditional banking system for some people. Online P2P lending basically extends the decision process based on personal credit onto the Internet [Bachmann et al. 2011; Collier & Hampshire 2010; Lin et al. 2009; Lin et al. 2013; Wang & Greiner 2011]. Since the first online P2P lending platform Zopa was established in the UK in 2005, this novel financial business has been growing rather rapidly in many other countries such as the USA, Denmark, Japan, and China. The worldwide online P2P lending business has seen continuous growth at a high speed: in April, 2014, an increase of 30% from March for Prosper (US), 40% for Smava (DE), 10% for Zopa (UK), and etc. (P2P-Banking.com).Despite the distinctive benefits of the online P2P lending, a high degree of information asymmetry in the market has been considered a substantial problem that hurts the market efficiency. This asymmetry exposes the lenders to a higher risk in their investment and tends to distort their bidding decisions [Chen & Han 2012; Yum et al. 2012]. However, other researchers argue that the market inefficiency induced by information asymmetry can, to an extent, be alleviated by other factors such as the disclosure of the borrower's financial and personal information or the development of mutual trust between the users. [Freedman & Jin 2008; Herzenstein et al. 2011; Iyer et al. 2009; Klafft 2008; Pope & Sydnor 2008; Ravina 2008; William et al. 2009]. We summarize the differences between traditional lending and P2P lending in Table 1.Along with the market efficiency issue, academic attention has been increasingly focused on the factor affecting the lenders' bidding strategies, which is mainly measured by the fund success rate. For example, researchers found a positive impact of the offered interest rate and the loan amount on increasing the funding rate [Barasinska & Schafer 2010; Freedman & Jin 2008; Pope & Sydnor 2008]. Also, others found credit scores and the financial history to have a strong impact on successful funding [Klafft 2008; William et al. … |
| Starting Page | 242 |
| Ending Page | 242 |
| Page Count | 1 |
| File Format | PDF HTM / HTML |
| Volume Number | 16 |
| Alternate Webpage(s) | http://web.csulb.edu/journals/jecr/issues/20153/Paper5.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
