Institutional investment in online business lending markets

Mark Cummins, Ciarán Mac an Bhaird, Pierangleo Rosati and Theo Lynn

International Review of Financial Analysis, 2020, vol. 71, issue C

Abstract: We provide new insights into the business lending decisions of institutional investors in online credit markets by benchmarking their lending performance against that of retail investors.We find superior performance for loans financed by institutional investors, although large sized retail investor groups achieve equivalent performance. Lending decisions of institutional investors are not default risk minimising, and we quantify lending inefficiencies. From a platform perspective, we show that (i) the platform-administered loan allocation process is not biased in favour of institutional investors, (ii) institutional participation in the retail marketplace is not a distorting factor in loan performance, and (iii) the platform’s move to a fixed rate system had detrimental effects on loan outcomes for institutional investors. The superior loan performance achieved by institutional investors is confined to the auction period, when institutional investors had autonomy over setting interest rates.

Keywords: Institutional investment; Online business lending; Default risk minimisation; Lending efficiency (search for similar items in EconPapers)
JEL-codes: D D81 D82 G11 G21 G23 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521920301861
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:finana:v:71:y:2020:i:c:s1057521920301861

DOI: 10.1016/j.irfa.2020.101542

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().