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The Value of Financial Intermediation: Evidence from Online Debt Crowdfunding

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  • Pavanini, Nicola
  • Braggion, Fabio
  • Manconi, Alberto
  • Zhu, Haikun

Abstract

Whereas many online marketplaces are fundamentally peer-to-peer, credit ones sell diversified loan portfolios characterized by maturity mismatch, a traditional feature of financial intermediation. To understand why, we develop a structural model of online debt crowdfunding and estimate it on a novel database from a large Chinese platform. Abandoning the peer-to-peer paradigm raises lender surplus, platform profits, and credit provision, but exposes investors to liquidity risk. A counterfactual where the platform resembles a bank by bearing liquidity risk generates larger lender surplus and credit provision when liquidity is low. More generally, our results shed light on how financial intermediation creates value.

Suggested Citation

  • Pavanini, Nicola & Braggion, Fabio & Manconi, Alberto & Zhu, Haikun, 2022. "The Value of Financial Intermediation: Evidence from Online Debt Crowdfunding," CEPR Discussion Papers 14740, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:14740
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    Cited by:

    1. Nam, Rachel J., 2022. "Open banking and customer data sharing: Implications for FinTech borrowers," SAFE Working Paper Series 364, Leibniz Institute for Financial Research SAFE.

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    More about this item

    Keywords

    Marketplace credit; Chinese financial system; Structural estimation;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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