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Household Credit and Regulatory Arbitrage: Evidence from Online Marketplace Lending

Author

Listed:
  • Fabio Braggion

    (Finance Department, Tilburg University, Tilburg 5000 LE, Netherlands)

  • Alberto Manconi

    (Finance Department, Bocconi University, Milan 20136, Italy)

  • Haikun Zhu

    (Department of Business Economics, Erasmus School of Economics, Erasmus University Rotterdam, Rotterdam 3000D DR, Netherlands)

Abstract

We study the relationship between new intermediaries and regulatory arbitrage, analyzing marketplace credit around a tightening of mortgage loan-to-value (LTV) caps in several cities in China in 2013. Using novel data covering over 20% of Chinese marketplace credit as well as the universe of loans and loan applications at a leading online lending platform, we provide evidence consistent with home buyers borrowing online to bypass the tighter LTV cap. Our findings point to new, lightly regulated financial intermediaries as a driver of household leverage, suggesting that they can open nonnegligible regulatory arbitrage channels.

Suggested Citation

  • Fabio Braggion & Alberto Manconi & Haikun Zhu, 2023. "Household Credit and Regulatory Arbitrage: Evidence from Online Marketplace Lending," Management Science, INFORMS, vol. 69(10), pages 6271-6292, October.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:10:p:6271-6292
    DOI: 10.1287/mnsc.2022.4592
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