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What does not kill us makes us stronger: the story of repetitive consumer loan applications

Author

Listed:
  • Mustafa Caglayan
  • Oleksandr Talavera
  • Lin Xiong
  • Jing Zhang

Abstract

We investigate borrower and lender behaviours when the borrower has experienced a sequence of failed loan applications. Our analysis is based on half a million observations from an established peer-to-peer (P2P) loan platform in China from 2010 to 2018. We find that borrowers who have better credit scores and who accept to pay higher interest rates are likely to reapply for funds after experiencing an earlier failed attempt. However, women and applicants with more education are discouraged from re-applying compared to their male or less-educated counterparts, respectively. On the funding supply side, lenders strive to fund safe borrowers who have high credit ratings and high income, though not those who offer a high interest rate.

Suggested Citation

  • Mustafa Caglayan & Oleksandr Talavera & Lin Xiong & Jing Zhang, 2022. "What does not kill us makes us stronger: the story of repetitive consumer loan applications," The European Journal of Finance, Taylor & Francis Journals, vol. 28(1), pages 46-65, January.
    • Handle: RePEc:taf:eurjfi:v:28:y:2022:i:1:p:46-65
    DOI: 10.1080/1351847X.2020.1793792
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    Cited by:

    1. Prodia Nur Kemala & Deddy Priatmodjo Koesrindartoto & Dzikri Firmansyah Hakam, 2026. "Advancing inclusive finance through financial technology (FinTech): peer-to-peer (P2P) and digital lending as catalyst for financial inclusion," Digital Finance, Springer, vol. 8(1), pages 1-20, March.
    2. French, Declan, 2023. "Exploring household financial strain dynamics," International Review of Financial Analysis, Elsevier, vol. 86(C).
    3. Caglayan, Mustafa & Talavera, Oleksandr & Xiong, Lin, 2022. "Female small business owners in China: Discouraged, not discriminated," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    4. Ge Gao & Mustafa Caglayan & Yuelei Li & Oleksandr Talavera, 2021. "Expert imitation in P2P markets," Manchester School, University of Manchester, vol. 89(5), pages 470-485, September.
    5. Li, Zongyuan & Li, Jingya & Chang, Xiao, 2024. "Market uncertainties and too-big-to-fail perception: Evidence from Chinese P2P registration requirements," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 95(C).

    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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