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Why does regional information matter? evidence from peer-to-peer lending

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  • Tong Wang
  • Sheng Zhao
  • Xin Shen

Abstract

In this paper, we study regional discrimination in a peer-to-peer lending scenario and provide novel empirical evidence for theories of soft information collection and information cost. We find that the regional information matters for borrowers' funding probabilities and that discrimination is profit-oriented or taste-oriented depending on the specific region. Moreover, using borrowers' birthplace as an instrumental variable, we find no evidence of genuine discrimination based purely on region in the peer-to-peer lending market.

Suggested Citation

  • Tong Wang & Sheng Zhao & Xin Shen, 2021. "Why does regional information matter? evidence from peer-to-peer lending," The European Journal of Finance, Taylor & Francis Journals, vol. 27(4-5), pages 346-366, March.
    • Handle: RePEc:taf:eurjfi:v:27:y:2021:i:4-5:p:346-366
    DOI: 10.1080/1351847X.2020.1720262
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    Cited by:

    1. Jin, Ming & Yin, Mingmei & Chen, Zhongfei, 2021. "Do investors prefer borrowers from high level of trust cities? Evidence from China’s P2P market," Research in International Business and Finance, Elsevier, vol. 58(C).
    2. Wang, Tong & Zhao, Sheng & Zhou, Mengqiu, 2022. "Does soft information in expert ratings curb information asymmetry? Evidence from crowdfunding and early transaction phases of Initial Coin offerings," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    3. Jianwen Li & Jinyan Hu, 2022. "Migrants and default: Evidence from China," International Review of Finance, International Review of Finance Ltd., vol. 22(3), pages 472-505, September.

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