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Personal information in peer-to-peer loan applications: Is less more?

Author

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  • Prystav, Fabian

Abstract

Operators of online peer-to-peer lending platforms can decide which pieces of information are made visible within loan requests, therefore potentially influencing lenders’ investment behavior. In this study’s experiment, participants were asked to allocate an amount of € 1000 between real peer-to-peer loan requests and a bank account. Against the initial theory-based expectation, the amount allocated to loan projects versus the bank decreases with ascending levels of information availability. A premature conclusion that “less is more” when it comes to personal information in peer-to-peer loans, has to be revised based on the finding that investors ignore projects from the worst–but most common–rating category X, unless personal information is available to mitigate information asymmetries. In addition, investors are found to be attracted by high monthly liquidity of borrowers, penalize loan applicants seeking funding for non-existential purposes and support those who state self-employment or personal education as loan purpose.

Suggested Citation

  • Prystav, Fabian, 2016. "Personal information in peer-to-peer loan applications: Is less more?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 9(C), pages 6-19.
    • Handle: RePEc:eee:beexfi:v:9:y:2016:i:c:p:6-19
    DOI: 10.1016/j.jbef.2015.11.005
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    Citations

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    Cited by:

    1. Zanin, Luca, 2020. "Combining multiple probability predictions in the presence of class imbalance to discriminate between potential bad and good borrowers in the peer-to-peer lending market," Journal of Behavioral and Experimental Finance, Elsevier, vol. 25(C).
    2. Andreas Hoegen & Dennis M. Steininger & Daniel Veit, 2018. "How do investors decide? An interdisciplinary review of decision-making in crowdfunding," Electronic Markets, Springer;IIM University of St. Gallen, vol. 28(3), pages 339-365, August.
    3. Mohammad Tariqul Islam Khan, 2022. "Determinants and preferences for a crowdfunding project," Future Business Journal, Springer, vol. 8(1), pages 1-12, December.
    4. Xin Li & Xiujuan Tian, 2022. "Research on SMEs’ Reputation Mechanism and Default Risk Based on Investors’ Financial Participation," Sustainability, MDPI, vol. 14(21), pages 1-17, November.

    More about this item

    Keywords

    Peer-to-peer lending; Information availability; Behavioral finance experiment;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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