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

Author

Listed:
  • Mustafa Caglayan

    (Heriot-Watt University)

  • Oleksandr Talavera

    () (University of Birmingham)

  • Lin Xiong

    (Robert Gordon University)

  • Jing Zhang

    (Tianjin University)

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 over 2010-2018. We find that borrowers with better credit scores and those who can offer higher rates are likely to reapply for funds after a failed attempt. Yet, females and applicants with better education are discouraged quickly. On the funding supply side, lenders strive to fund safe borrowers with high credit rating and high income, not those who offer high interest rate. 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 over 2010-2018. We find that borrowers with better credit scores and those who can offer higher rates are likely to reapply for funds after a failed attempt. Yet, females and applicants with better education are discouraged quickly. On the funding supply side, lenders strive to fund safe borrowers with high credit rating and high income, not those who offer high interest rate.

Suggested Citation

  • Mustafa Caglayan & Oleksandr Talavera & Lin Xiong & Jing Zhang, 2019. "What does not kill us makes us stronger: the story of repetitive consumer loan applications," Discussion Papers 19-01, Department of Economics, University of Birmingham.
  • Handle: RePEc:bir:birmec:19-01
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Peer-to-peer (P2P) lending; Discouraged borrowers; Listing outcomes; Information problem; Fintech; China;

    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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