IDEAS home Printed from https://ideas.repec.org/a/inm/orisre/v31y2020i3p715-730.html
   My bibliography  Save this article

When Online Lending Meets Real Estate: Examining Investment Decisions in Lending-Based Real Estate Crowdfunding

Author

Listed:
  • Yang Jiang

    (School of Business, Nanjing University, Nanjing, 210093 Jiangsu, China)

  • Yi-Chun (Chad) Ho

    (School of Business, George Washington University, Washington, District of Columbia 20052)

  • Xiangbin Yan

    (Donlinks School of Economics and Management, University of Science and Technology Beijing, 100083 Beijing, China)

  • Yong Tan

    (Michael G. Foster School of Business, University of Washington, Seattle, Washington 98195)

Abstract

In lending-based real estate crowdfunding, borrowers are required to pledge their housing properties as collateral to secure the loans. This nascent practice differs from ordinary peer-to-peer lending in that lenders, to make sound investment decisions, need to process additional information other than basic loan attributes. We examine how lender behavior of investing in real-estate-secured loans is shaped by information that is particularly relevant in such an emerging market. We collect and analyze the data from a large lending-based real estate crowdfunding platform, where each loan is secured by either a mortgage (a mortgage-secured or MS loan) or a borrower’s own house (a house-secured or HS loan). Our analysis reveals that lender decisions of how fast to invest and how much to invest are influenced by both on-platform and off-platform information. For on-platform information, we find that lenders as a whole prefer HS loans to MS loans, as reflected in quicker and larger lending transactions. Experienced lenders tend to invest more aggressively, in both time and amount, but exhibit a weaker preference for HS loans as compared with their inexperienced counterparts. As to off-platform information, our results show that a rise in housing prices is associated with quicker investment decisions, and this association is found to be even stronger on HS loans. Further, when stock market volatility is large, lenders tend to slow down their investment behavior; however, we find such a tendency weaker on MS loans. This research contributes to the literature by establishing relationships between crowdfunding activities, housing prices and stock market performance. Our findings also provide implications for managers and platform designers who desire to stimulate and leverage the fundraising momentum.

Suggested Citation

  • Yang Jiang & Yi-Chun (Chad) Ho & Xiangbin Yan & Yong Tan, 2020. "When Online Lending Meets Real Estate: Examining Investment Decisions in Lending-Based Real Estate Crowdfunding," Information Systems Research, INFORMS, vol. 31(3), pages 715-730, September.
    • Handle: RePEc:inm:orisre:v:31:y:2020:i:3:p:715-730
    DOI: 10.1287/isre.2019.0909
    as

    Download full text from publisher

    File URL: https://doi.org/10.1287/isre.2019.0909
    Download Restriction: no
    File URL: https://libkey.io/10.1287/isre.2019.0909?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Sam Ransbotham & Nicholas H. Lurie & Hongju Liu, 2019. "Creation and Consumption of Mobile Word of Mouth: How Are Mobile Reviews Different?," Marketing Science, INFORMS, vol. 38(5), pages 773-792, September.
    2. Hainmueller, Jens, 2012. "Entropy Balancing for Causal Effects: A Multivariate Reweighting Method to Produce Balanced Samples in Observational Studies," Political Analysis, Cambridge University Press, vol. 20(1), pages 25-46, January.
    3. Gordon Burtch & Anindya Ghose & Sunil Wattal, 2016. "Secret Admirers: An Empirical Examination of Information Hiding and Contribution Dynamics in Online Crowdfunding," Information Systems Research, INFORMS, vol. 27(3), pages 478-496, September.
    4. Douglas Cumming & Lars Hornuf (ed.), 2018. "The Economics of Crowdfunding," Springer Books, Springer, number 978-3-319-66119-3, September.
    5. Rodney Ramcharan & Christopher Crowe, 2013. "The Impact of House Prices on Consumer Credit: Evidence from an Internet Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 1085-1115, September.
    6. Mingfeng Lin & Siva Viswanathan, 2016. "Home Bias in Online Investments: An Empirical Study of an Online Crowdfunding Market," Management Science, INFORMS, vol. 62(5), pages 1393-1414, May.
    7. Lars Hornuf & Matthias Neuenkirch, 2017. "Pricing shares in equity crowdfunding," Small Business Economics, Springer, vol. 48(4), pages 795-811, April.
    8. Damien Joseph & Soon Ang & Sandra A. Slaughter, 2015. "Turnover or Turnaway? Competing Risks Analysis of Male and Female IT Professionals’ Job Mobility and Relative Pay Gap," Information Systems Research, INFORMS, vol. 26(1), pages 145-164, March.
    9. Rodney Ramcharan & Christopher Crowe, 2013. "The Impact of House Prices on Consumer Credit: Evidence from an Internet Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(6), pages 1085-1115, September.
    10. Gordon Burtch & Anindya Ghose & Sunil Wattal, 2013. "An Empirical Examination of the Antecedents and Consequences of Contribution Patterns in Crowd-Funded Markets," Information Systems Research, INFORMS, vol. 24(3), pages 499-519, September.
    11. Sunil Mithas & M. S. Krishnan, 2009. "From Association to Causation via a Potential Outcomes Approach," Information Systems Research, INFORMS, vol. 20(2), pages 295-313, June.
    12. Keongtae Kim & Il-Horn Hann, 2019. "Crowdfunding and the Democratization of Access to Capital—An Illusion? Evidence from Housing Prices," Service Science, INFORMS, vol. 30(1), pages 276-290, March.
    13. Juanjuan Zhang & Peng Liu, 2012. "Rational Herding in Microloan Markets," Management Science, INFORMS, vol. 58(5), pages 892-912, May.
    14. Alberto Abadie & Guido W. Imbens, 2006. "Large Sample Properties of Matching Estimators for Average Treatment Effects," Econometrica, Econometric Society, vol. 74(1), pages 235-267, January.
    15. James Vaupel & Kenneth Manton & Eric Stallard, 1979. "The impact of heterogeneity in individual frailty on the dynamics of mortality," Demography, Springer;Population Association of America (PAA), vol. 16(3), pages 439-454, August.
    16. Jefferson Duarte & Stephan Siegel & Lance Young, 2012. "Trust and Credit: The Role of Appearance in Peer-to-peer Lending," The Review of Financial Studies, Society for Financial Studies, vol. 25(8), pages 2455-2484.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yipu Deng & Jinyang Zheng & Warut Khern-am-nuai & Karthik Kannan, 2022. "More than the Quantity: The Value of Editorial Reviews for a User-Generated Content Platform," Management Science, INFORMS, vol. 68(9), pages 6865-6888, September.
    2. Li, Jianwen & Zhang, Bo & Jiang, Mingming & Hu, Jinyan, 2023. "Homophilous intensity in the online lending market: Bidding behavior and economic effects," Journal of Banking & Finance, Elsevier, vol. 152(C).
    3. Kreppmeier, Julia & Laschinger, Ralf & Steininger, Bertram I. & Dorfleitner, Gregor, 2023. "Real estate security token offerings and the secondary market: Driven by crypto hype or fundamentals?," Journal of Banking & Finance, Elsevier, vol. 154(C).
    4. Zhao Wang & Cuiqing Jiang & Huimin Zhao, 2022. "Know Where to Invest: Platform Risk Evaluation in Online Lending," Information Systems Research, INFORMS, vol. 33(3), pages 765-783, September.
    5. Maggie Rong Hu & Xiaoyang Li & Yang Shi & Xiaoquan (Michael) Zhang, 2023. "Numerological Heuristics and Credit Risk in Peer-to-Peer Lending," Information Systems Research, INFORMS, vol. 34(4), pages 1744-1760, December.
    6. Kreppmeier, Julia & Laschinger, Ralf & Steininger, Bertram & Dorfleitner, Gregor, 2023. "Real Estate Security Token Offerings and the Secondary Market: Driven by Crypto Hype or Fundamentals?," Working Paper Series 23/6, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    7. Ruyi Ge & Zhiqiang (Eric) Zheng & Xuan Tian & Li Liao, 2021. "Human–Robot Interaction: When Investors Adjust the Usage of Robo-Advisors in Peer-to-Peer Lending," Information Systems Research, INFORMS, vol. 32(3), pages 774-785, September.
    8. Alexandra Mora-Cruz & Pedro R. Palos-Sanchez, 2023. "Crowdfunding platforms: a systematic literature review and a bibliometric analysis," International Entrepreneurship and Management Journal, Springer, vol. 19(3), pages 1257-1288, September.
    9. Shengsheng Xiao & Yi‐Chun (Chad) Ho & Hai Che, 2021. "Building the Momentum: Information Disclosure and Herding in Online Crowdfunding," Production and Operations Management, Production and Operations Management Society, vol. 30(9), pages 3213-3230, September.
    10. Kai Lu & Zaiyan Wei & Tat Y. Chan, 2022. "Information Asymmetry Among Investors and Strategic Bidding in Peer-to-Peer Lending," Information Systems Research, INFORMS, vol. 33(3), pages 824-845, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yuho Chung & Yiwei Li & Jianmin Jia, 2021. "Exploring embeddedness, centrality, and social influence on backer behavior: the role of backer networks in crowdfunding," Journal of the Academy of Marketing Science, Springer, vol. 49(5), pages 925-946, September.
    2. Pankaj Kumar Maskara & Emre Kuvvet & Gengxuan Chen, 2021. "The role of P2P platforms in enhancing financial inclusion in the United States: An analysis of peer‐to‐peer lending across the rural–urban divide," Financial Management, Financial Management Association International, vol. 50(3), pages 747-774, September.
    3. Sunghun Chung & Keongtae Kim & Chul Ho Lee & Wonseok Oh, 2023. "Interdependence between online peer‐to‐peer lending and cryptocurrency markets and its effects on financial inclusion," Production and Operations Management, Production and Operations Management Society, vol. 32(6), pages 1939-1957, June.
    4. Zaiyan Wei & Mingfeng Lin, 2017. "Market Mechanisms in Online Peer-to-Peer Lending," Management Science, INFORMS, vol. 63(12), pages 4236-4257, December.
    5. Maggie Rong Hu & Xiaoyang Li & Yang Shi & Xiaoquan (Michael) Zhang, 2023. "Numerological Heuristics and Credit Risk in Peer-to-Peer Lending," Information Systems Research, INFORMS, vol. 34(4), pages 1744-1760, December.
    6. Marco Bade & Martin Walther, 2021. "Local preferences and the allocation of attention in equity-based crowdfunding," Review of Managerial Science, Springer, vol. 15(8), pages 2501-2533, November.
    7. Martin Walther & Marco Bade, 2020. "Observational learning and willingness to pay in equity crowdfunding," Business Research, Springer;German Academic Association for Business Research, vol. 13(2), pages 639-661, July.
    8. Boudreau, Kevin J. & Jeppesen, Lars Bo & Reichstein, Toke & Rullani, Francesco, 2021. "Crowdfunding as Donations to Entrepreneurial Firms," Research Policy, Elsevier, vol. 50(7).
    9. Chan, C.S. Richard & Parhankangas, Annaleena & Sahaym, Arvin & Oo, Pyayt, 2020. "Bellwether and the herd? Unpacking the u-shaped relationship between prior funding and subsequent contributions in reward-based crowdfunding," Journal of Business Venturing, Elsevier, vol. 35(2).
    10. Zaggl, Michael A. & Block, Joern, 2019. "Do small funding amounts lead to reverse herding? A field experiment in reward-based crowdfunding," Journal of Business Venturing Insights, Elsevier, vol. 12(C).
    11. Dongyu Chen & Xiaolin Li & Fujun Lai, 2023. "Shill bidding in lenders’ eyes? A cross-country study on the influence of large bids in online P2P lending," Electronic Commerce Research, Springer, vol. 23(2), pages 1089-1114, June.
    12. Yan Lin & Wai Fong Boh, 2020. "How different Are crowdfunders? Examining archetypes of crowdfunders," Journal of the Association for Information Science & Technology, Association for Information Science & Technology, vol. 71(11), pages 1357-1370, November.
    13. Carla Martínez-Climent & Ana Zorio-Grima & Domingo Ribeiro-Soriano, 2018. "Financial return crowdfunding: literature review and bibliometric analysis," International Entrepreneurship and Management Journal, Springer, vol. 14(3), pages 527-553, September.
    14. Xiaoyu Li & Jiahong Yuan & Yan Shi & Zilai Sun & Junhu Ruan, 2020. "Emerging Trends and Innovation Modes of Internet Finance—Results from Co-Word and Co-Citation Networks," Future Internet, MDPI, vol. 12(3), pages 1-14, March.
    15. Saul Estrin & Susanna Khavul & Mike Wright, 2022. "Soft and hard information in equity crowdfunding: network effects in the digitalization of entrepreneurial finance," Small Business Economics, Springer, vol. 58(4), pages 1761-1781, April.
    16. Aurélien Petit & Peter Wirtz, 2022. "Experts in the crowd and their influence on herding in reward-based crowdfunding of cultural projects," Small Business Economics, Springer, vol. 58(1), pages 419-449, January.
    17. Bryan Bollinger & Song Yao, 2018. "Risk transfer versus cost reduction on two-sided microfinance platforms," Quantitative Marketing and Economics (QME), Springer, vol. 16(3), pages 251-287, September.
    18. Bertsch, Christoph & Hull, Isaiah & Qi, Yingjie & Zhang, Xin, 2020. "Bank misconduct and online lending," Journal of Banking & Finance, Elsevier, vol. 116(C).
    19. Oleksandr Talavera & Haofeng Xu, 2018. "Role of Verification in Peer-to-Peer Lending," Working Papers 2018-25, Swansea University, School of Management.
    20. Nguyen, Thang & Cox, Joe & Rich, Judy, 2019. "Invest or regret? An empirical investigation into funding dynamics during the final days of equity crowdfunding campaigns," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 784-803.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:orisre:v:31:y:2020:i:3:p:715-730. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.