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Voluntary Verifiable Information Disclosure And Loan Funding Performance: Evidence From Paipaidai In China

Author

Listed:
  • YING LI

    (Department of Accounting and Finance, Macau University of Science and Technology, Macau)

  • JACKY SO

    (#x2020;Department of Finance and Business Economics, University of Macau, Macau)

  • JIA YUAN

    (#x2020;Department of Finance and Business Economics, University of Macau, Macau)

Abstract

We investigate what mechanism helps to motivate the willingness of Chinese people to lend money to strangers online in the peer-to-peer (P2P) lending market. We argue that the voluntary verifiable information disclosure created by Chinese P2P practitioners helps to mitigate the asymmetric information problem and facilitates lending transactions between lenders and borrowers. We exploit a unique individual level data set obtained from Paipaidai, a leading Chinese P2P company, and evaluate the extent that the voluntary verifiable information disclosure helps to ease adverse selection problems. We find that information disclosure does increase the probability that a loan listing will be successfully funded by around 10% on average. We also find that the voluntary verifiable information disclosure helps to decrease the equilibrium interest rate by around 0.2% on average.

Suggested Citation

  • Ying Li & Jacky So & Jia Yuan, 2020. "Voluntary Verifiable Information Disclosure And Loan Funding Performance: Evidence From Paipaidai In China," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(02), pages 419-441, March.
  • Handle: RePEc:wsi:serxxx:v:65:y:2020:i:02:n:s0217590818500066
    DOI: 10.1142/S0217590818500066
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    Cited by:

    1. Xin Li & Xiujuan Tian, 2022. "Research on SMEs’ Reputation Mechanism and Default Risk Based on Investors’ Financial Participation," Sustainability, MDPI, vol. 14(21), pages 1-17, November.

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