The influence of regional sentiment on online borrowing

William Bazley and Sima Jannati

International Review of Financial Analysis, 2024, vol. 95, issue PB

Abstract: Innovations in financial technology have broadened individuals’ access to unsecured personal loans. Drawing on insights from consumer behavior research linking negative emotions to credit-financed consumption, we demonstrate that transitory emotions impact the aggregate use of online loans in a region. Specifically, an increase in households’ lack of positive emotion in a Metropolitan Statistical Area (MSA) is associated with higher demand for loans in that area. However, this emotion-driven borrowing is associated with a lower likelihood of repayment. Moreover, we find that transient emotions do not affect the use of debt provided by traditional credit suppliers. Our evidence underscores the heterogeneous implications of negative sentiment for borrowing behavior, contingent on the convenience of the debt source.

Keywords: Emotions; Negative sentiment; Financial technology; Peer-to-peer credit (search for similar items in EconPapers)
JEL-codes: D12 D14 G40 G51 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:95:y:2024:i:pb:s1057521924003557

DOI: 10.1016/j.irfa.2024.103423

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