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Peer effect and funding success: Analyzing friendship networks in online credit markets

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  • Gao, Hongming
  • Zhu, Hui
  • Ma, Haiying

Abstract

The challenge of limited information in online credit markets is well-recognized. This study examines the peer effect in microloan transactions using data from a leading Chinese lending platform. Results show that the likelihood of a borrower's funding success is higher when a higher proportion of online friends succeed. Both borrowers’ network centrality and digital footprints strengthen this effect, suggesting two mechanisms: social learning and informational complementarity. The peer effect is stronger among borrowers with larger networks, more loan experience, better repayment, and older age. The research provides new insights to mitigate information asymmetry in financial markets and guide investment decisions.

Suggested Citation

  • Gao, Hongming & Zhu, Hui & Ma, Haiying, 2024. "Peer effect and funding success: Analyzing friendship networks in online credit markets," Finance Research Letters, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finlet:v:66:y:2024:i:c:s1544612324006810
    DOI: 10.1016/j.frl.2024.105651
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    References listed on IDEAS

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    Cited by:

    1. Bosompim, Prince & Essieku, Richmond & Letikiewicz, Jodi, 2026. "In whom we trust? Social networks and trust in AI vs. human experts financial advice," Finance Research Letters, Elsevier, vol. 91(C).

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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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