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Platform Characteristics and Online Peer-to-Peer Lending: Evidence from China

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  • Wang, Qi
  • Xiong, Xiong
  • Zheng, Zunxin

Abstract

In consideration of information asymmetry, this paper focuses on the impact of platform information on online P2P lending transactions and borrower and lender behavior to understand the role of P2P platforms. Using P2P platform data in China, we obtain the following findings. 1) Platforms with good attributes are more attractive to lenders11These good attributes are venture capital background, larger registered capital, longer operating time, good rank and active trading., while borrowers tend to seek small and new platforms, ceteris paribus; lenders care more about investment safety than investment return. 2) The most important factor for both borrowers and lenders is the number of counterparties, so positive externality is in effect. 3) Lenders have a greater impact on borrowers than do borrowers on lenders. In addition, lenders are most concerned about platforms; hence, platforms should consider attracting investors their priority. 4) While essentially decided by the supply and demand of funds, interest rate can be adjusted by platform characteristics. In addition to the pure supply-and-demand effect, a negative scale effect and a negative background effect are confirmed22We refer to this pure correlation between trading volume, different types of shareholder backgrounds and the interest rate as scale effect and background effect, respectively.. 5) There is an inverted U-shaped relationship between the average interest rate and the number of investors, and no quadratic effect on the borrower side is found.

Suggested Citation

  • Wang, Qi & Xiong, Xiong & Zheng, Zunxin, 2021. "Platform Characteristics and Online Peer-to-Peer Lending: Evidence from China," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612320301756
    DOI: 10.1016/j.frl.2020.101511
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    References listed on IDEAS

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    1. Dongyu Chen & Xiaolin Li & Fujun Lai, 2017. "Gender discrimination in online peer-to-peer credit lending: evidence from a lending platform in China," Electronic Commerce Research, Springer, vol. 17(4), pages 553-583, December.
    2. Ding, Jie & Huang, Jinbo & Li, Yong & Meng, Meichen, 2019. "Is there an effective reputation mechanism in peer-to-peer lending? Evidence from China," Finance Research Letters, Elsevier, vol. 30(C), pages 208-215.
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    5. Yuwei Yan & Zhihan Lv & Bin Hu, 2018. "Building investor trust in the P2P lending platform with a focus on Chinese P2P lending platforms," Electronic Commerce Research, Springer, vol. 18(2), pages 203-224, June.
    6. Herzenstein, Michal & Dholakia, Utpal M. & Andrews, Rick L., 2011. "Strategic Herding Behavior in Peer-to-Peer Loan Auctions," Journal of Interactive Marketing, Elsevier, vol. 25(1), pages 27-36.
    7. Xuchen Lin & Xiaolong Li & Zhong Zheng, 2017. "Evaluating borrower’s default risk in peer-to-peer lending: evidence from a lending platform in China," Applied Economics, Taylor & Francis Journals, vol. 49(35), pages 3538-3545, July.
    8. Riza Emekter & Yanbin Tu & Benjamas Jirasakuldech & Min Lu, 2015. "Evaluating credit risk and loan performance in online Peer-to-Peer (P2P) lending," Applied Economics, Taylor & Francis Journals, vol. 47(1), pages 54-70, January.
    9. Mingfeng Lin & Nagpurnanand R. Prabhala & Siva Viswanathan, 2013. "Judging Borrowers by the Company They Keep: Friendship Networks and Information Asymmetry in Online Peer-to-Peer Lending," Management Science, INFORMS, vol. 59(1), pages 17-35, August.
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    Cited by:

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    3. Wang, Jin & Li, Rui, 2023. "Asymmetric information in peer-to-peer lending: empirical evidence from China," Finance Research Letters, Elsevier, vol. 51(C).

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