Credit rationing in P2P lending to SMEs: Do lender-borrower relationships matter?

Rients Galema

Journal of Corporate Finance, 2020, vol. 65, issue C

Abstract: This paper studies the role of individual P2P investors that are acquainted with the borrower in mitigating credit rationing in P2P lending to SMEs. I use proprietary data provided by one of the biggest Dutch P2P lending platforms, on which personal acquaintances of the borrower are able to invest before other P2P investors do. I find that P2P investors invest more in loans of borrowers to whom they are personally acquainted. More initial investment by investors acquainted with the borrower is subsequently associated with a higher likelihood of obtaining a second loan from the P2P lender, larger investments by other P2P investors and lower ex post defaults. These results are consistent with informal lenders having superior information or monitoring skills and rational herding following informal investors' investment decisions.

Keywords: P2P lending; Credit rationing; SMEs; Informal finance (search for similar items in EconPapers)
JEL-codes: D82 G21 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0929119920301863
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:65:y:2020:i:c:s0929119920301863

DOI: 10.1016/j.jcorpfin.2020.101742

Access Statistics for this article

Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter

More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().