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What does peer-to-peer lending evidence say about the Risk-Taking Channel of monetary policy?

Yiping Huang, Xiang Li () and Chu Wang

Journal of Corporate Finance, 2021, vol. 66, issue C

Abstract: This paper uses loan application-level data from a peer-to-peer lending platform to study the risk-taking channel of monetary policy. By employing a direct ex-ante measure of risk-taking and estimating the simultaneous equations of loan approval and loan amount, we provide evidence of monetary policy's impact on a nonbank financial institution's risk-taking. We find that the search-for-yield is the main driving force of the risk-taking effect, while we do not observe consistent findings of risk-shifting from the liquidity change. Monetary policy easing is associated with a higher probability of granting loans to risky borrowers and greater riskiness of credit allocation. However, these changes do not necessarily relate to a larger loan amount on average.

Keywords: Monetary policy; Risk-taking; Nonbank financial institution; Peer-to-peer lending; Search-for-yield; Risk-shifting (search for similar items in EconPapers)
JEL-codes: E52 G23 (search for similar items in EconPapers)
Date: 2021
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Working Paper: What does peer-to-peer lending evidence say about the risk-taking channel of monetary policy? (2019) Downloads
Working Paper: What Does Peer-To-Peer Lending Evidence Say about the Risk-Taking Channel of Monetary Policy? (2019) Downloads
Working Paper: What does peer-to-peer lending evidence say about the risk-taking channel of monetary policy? (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:66:y:2021:i:c:s0929119920302893

DOI: 10.1016/j.jcorpfin.2020.101845

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