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P2P lenders versus banks: Cream skimming or bottom fishing?

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  • de Roure, Calebe
  • Pelizzon, Loriana
  • Thakor, Anjan V.

Abstract

We derive three testable predictions from a bank-P2P lender model of competition: (a) P2P lending grows when some banks are faced with exogenously higher regulatory costs; (b) P2P loans are riskier than bank loans; and (c) the risk-adjusted interest rates on P2P loans are lower than those on bank loans. We test these predictions against data on P2P loans and the consumer bank credit market in Germany and find empirical support. Overall, our analysis indicates that P2P lenders are bottom fishing, especially when regulatory shocks create a competitive disadvantage for some banks.

Suggested Citation

  • de Roure, Calebe & Pelizzon, Loriana & Thakor, Anjan V., 2021. "P2P lenders versus banks: Cream skimming or bottom fishing?," SAFE Working Paper Series 206, Leibniz Institute for Financial Research SAFE, revised 2021.
    • Handle: RePEc:zbw:safewp:206
    DOI: 10.2139/ssrn.3174632
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    More about this item

    Keywords

    P2P lending; bank lending; competition;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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