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Anti-Corruption Reforms and Microfinancing: Evidence from Households' Fintech Borrowing

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  • Zhang, Yifei

Abstract

Despite a surging literature in investigating different impacts of corruption and/or anti-corruption from firms’ perspective, it is still unclear whether and how corruption and/or anti-corruption affect households’ borrowing behaviour. In this paper, we focus on a Chinese online peer-to-peer lending market and analyse the impact of the recent China’s anti-corruption campaign on households’ borrowing costs. We employ a Difference-in-Differences (DID) estimation strategy and investigate three exogenous shocks regarding the movement: 1) the 2012 Eight Point Policy announcement; 2) multiple rounds of the Central Inspection Team Campaigns during 2013 and 2014; 3) and the anti-corruption rules for military-related personnel in early 2015. Our results show that equilibrium interest rates of borrowers pertaining to Non-SOEs dropped significantly comparing to that of SOEs and/or government agencies in the wake of the first two events. Borrowers affiliating with military-related institutions were also worsened after the military specific anti-corruption campaign. Finally, we examine the two possible economic channels. Suggestive evidences show that both a rise of interest risk premium for SOEs borrowers and a better outlook of Non-SOEs after the anti-corruption reform could account for the observed favour of the borrowing costs towards Non-SOEs borrowers. These findings are consistent with previous studies regarding the effects of anti-corruptions from firms’ aspects such as Lin et al., (2016) and Griffin et al., (2016). This study also complements the P2P literature by demonstrating the importance of online borrowers’ occupations / job affiliations.

Suggested Citation

  • Zhang, Yifei, 2019. "Anti-Corruption Reforms and Microfinancing: Evidence from Households' Fintech Borrowing," MPRA Paper 97015, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:97015
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    More about this item

    Keywords

    Peer-to-Peer Crowdfunding; Corruption; Household Debt;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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