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The Impact of Political Orientation on Investment Risk Appetite: Evidence from a US P2P Platform

In: Proceedings of the 2023 International Conference on Finance, Trade and Business Management (FTBM 2023)

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  • Baoxaing Xu

    (Hunan University of Finance and Economics)

Abstract

This study utilizes the loan data from Prosper Company between 2005 and 2008, consisting of 575,011 records, to investigate the influence of political preferences on lenders' risk-taking behavior. The political leaning of each lender is measured by the percentage of Republican legislators in their respective state. The maximum interest rate accepted by a lender is used as a proxy for their risk preference. The results suggest that lenders who lean more towards the Republican party tend to have a higher risk appetite in the personal credit market, and this effect becomes even more pronounced with increased external competition. Further research reveals that during the period of Republican rule, lenders with a Republican-leaning political preference held a more optimistic expectation of the personal credit market, resulting in higher risk-taking behavior. These findings contribute to our understanding of the impact of political preferences on investment decisions and provide new insights and methodologies for related fields of research.

Suggested Citation

  • Baoxaing Xu, 2023. "The Impact of Political Orientation on Investment Risk Appetite: Evidence from a US P2P Platform," Advances in Economics, Business and Management Research, in: Amalendu Bhunia & Rubi Binti Ahmad & Yifeng Zhu (ed.), Proceedings of the 2023 International Conference on Finance, Trade and Business Management (FTBM 2023), pages 561-567, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-298-9_61
    DOI: 10.2991/978-94-6463-298-9_61
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