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The Role of Punctuation in P2P Lending: Evidence from China

Author

Listed:
  • Xiao CHEN

    (Department of Finance, Jinan University, Guangzhou 510630, China.)

  • Bihong HUANG

    (Asian Development Bank Institute, Kasumigaseki Building 8F, 3-2-5 Kasumigaseki, Chiyoda-ku, Tokyo 100-6008, Japan.)

  • Dezhu YE

    (Department of Finance, Research Institute of Finance, Jinan University, Guangzhou 510630, China.)

Abstract

This paper investigates the role of punctuation in the peer-to-peer (P2P) lending market. Using data from Renrendai, one of the largest P2P lending platforms in China, we investigate how the amount of punctuation used in loan descriptions influences the funding probability, borrowing rate, and default. The empirical evidence shows that the amount of punctuation is negatively associated with the funding probability and borrowing rate. We propose that the usage of punctuation affects the readability of a loan description and reflects borrowers’ self-control and cognitive ability. Within a given number of words, excessive usage of punctuation makes loan description informal and reduces the readability of the text, thereby impairing investors’ trust in borrowers. Moreover, borrowers that overuse punctuation may have lower ability of self-control, and tend to underestimate the risk of borrowing and offer lower borrowing rate due to overconfidence.

Suggested Citation

  • Xiao CHEN & Bihong HUANG & Dezhu YE, 2017. "The Role of Punctuation in P2P Lending: Evidence from China," Economic Growth Centre Working Paper Series 1707, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
  • Handle: RePEc:nan:wpaper:1707
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    More about this item

    Keywords

    P2P lending; information asymmetry; word; punctuation;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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