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P2P Lenders versus Banks: Cream Skimming or Bottom Fishing?
[Loan officer incentives, internal rating models and default rates]

Author

Listed:
  • Calebe de Roure
  • Loriana Pelizzon
  • Anjan Thakor

Abstract

We derive three testable predictions from a bank-P2P lender model of competition: (a) P2P lending grows when some banks are faced with exogenously higher regulatory costs; (b) P2P loans are riskier than bank loans; and (c) the risk-adjusted interest rates on P2P loans are lower than those on bank loans. We test these predictions against data on P2P loans and the consumer bank credit market in Germany and find empirical support. Overall, our analysis indicates that P2P lenders are bottom fishing, especially when regulatory shocks create a competitive disadvantage for some banks. (JEL G21)

Suggested Citation

  • Calebe de Roure & Loriana Pelizzon & Anjan Thakor, 2022. "P2P Lenders versus Banks: Cream Skimming or Bottom Fishing? [Loan officer incentives, internal rating models and default rates]," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 11(2), pages 213-262.
    • Handle: RePEc:oup:rcorpf:v:11:y:2022:i:2:p:213-262.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfab026
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    JEL classification:

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

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