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How accounts shape lending decisions through fostering perceived trustworthiness

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  • Sonenshein, Scott
  • Herzenstein, Michal
  • Dholakia, Utpal M.
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    Abstract

    We examine the roles of social accounts in influencing lenders' decisions about loaning money to borrowers. Using field data and a laboratory experiment, we show that lenders will lend money depending on the accounts borrowers tell. In Study 1, field data from a peer-to-peer lending website reveal that two-account combinations (explanation-acknowledgment and explanation-denial) increase the likelihood of favorable lending decisions. A laboratory study helps explain the important role of accounts by unpacking the process of perceived borrower trustworthiness in lending decisions. A final field study assessing the performance of loans 2 years after origination shows that accounts, despite having a positive effect on the loan decision process, negatively predict loan performance. Collectively, the three studies show that accounts facilitate economic exchanges between unacquainted transaction partners because of their role in increasing perceived trustworthiness, but that ironically, accounts can negatively relate to loan performance.

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    Bibliographic Info

    Article provided by Elsevier in its journal Organizational Behavior and Human Decision Processes.

    Volume (Year): 115 (2011)
    Issue (Month): 1 (May)
    Pages: 69-84

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    Handle: RePEc:eee:jobhdp:v:115:y:2011:i:1:p:69-84

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    Web page: http://www.elsevier.com/locate/obhdp

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    Keywords: Accounts Trustworthiness Auctions Decision making under uncertainty Lending Peer-to-peer;

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    1. Tülin Erdem & Michael P. Keane, 1996. "Decision-Making Under Uncertainty: Capturing Dynamic Brand Choice Processes in Turbulent Consumer Goods Markets," Marketing Science, INFORMS, vol. 15(1), pages 1-20.
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    3. Artz, Kendall W. & Brush, Thomas H., 2000. "Asset specificity, uncertainty and relational norms: an examination of coordination costs in collaborative strategic alliances," Journal of Economic Behavior & Organization, Elsevier, vol. 41(4), pages 337-362, April.
    4. Kim, Peter H. & Dirks, Kurt T. & Cooper, Cecily D. & Ferrin, Donald L., 2006. "When more blame is better than less: The implications of internal vs. external attributions for the repair of trust after a competence- vs. integrity-based trust violation," Organizational Behavior and Human Decision Processes, Elsevier, vol. 99(1), pages 49-65, January.
    5. Aaker, Jennifer L & Williams, Patti, 1998. " Empathy versus Pride: The Influence of Emotional Appeals across Cultures," Journal of Consumer Research, University of Chicago Press, vol. 25(3), pages 241-61, December.
    6. Shapiro, Debra L. & Buttner, E. Holly & Barry, Bruce, 1994. "Explanations: What Factors Enhance Their Perceived Adequacy?," Organizational Behavior and Human Decision Processes, Elsevier, vol. 58(3), pages 346-368, June.
    7. Bozeman, Dennis P. & Kacmar, K. Michele, 1997. "A Cybernetic Model of Impression Management Processes in Organizations," Organizational Behavior and Human Decision Processes, Elsevier, vol. 69(1), pages 9-30, January.
    8. Siegel, Phyllis A. & Brockner, Joel, 2005. "Individual and organizational consequences of CEO claimed handicapping: What's good for the CEO may not be so good for the firm," Organizational Behavior and Human Decision Processes, Elsevier, vol. 96(1), pages 1-22, January.
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