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Does borrowers' impatience disclose their hidden information about default risk?

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  • Kraus, Daniel

Abstract

This chapter provides new evidence on borrowers' hidden information about their riskiness and its link to their impatience. To do so, I analyze consumer loans on the German platform Smava, which has a unique peer-to-peer lending process. Observationally identical but unobservably riskier borrowers offer investors a higher interest rate. This helps them to obtain their loan faster and with a higher probability. Very impatient borrowers who use Smava's instant loan service pay a higher interest rate and have a higher default risk than less impatient borrowers. These findings suggest that borrowers' impatience can be used to screen their riskiness.

Suggested Citation

  • Kraus, Daniel, 2013. "Does borrowers' impatience disclose their hidden information about default risk?," Thuenen-Series of Applied Economic Theory 132, University of Rostock, Institute of Economics.
    • Handle: RePEc:zbw:roswps:132
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Asymmetric Information; Financial Intermediation; Consumer loans; Patience;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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