The signaling effects of education in the online lending market: Evidence from China

Wenli Huang, Yanhong Qian and Nanyan Xu

Economic Modelling, 2020, vol. 92, issue C, 268-276

Abstract: In this study, we use data from an online lending platform named Xinxindai in China to empirically study the signaling effects of education for the default risk of borrowers. Three dependent variables are created, namely, the probability of default, overdue payments and overdue amount, and probit models, count models and Tobit models are employed correspondingly. The number of universities in the “211 Project” of China at the city level is employed as the instrumental variable. The empirical evidence shows that education generally plays a strong signaling role in the identification of borrowers’ default risk in China. The negative marginal effect of education declines as borrowing times increase and as the marketization of regions deepens. This study helps to fill an important gap in the existing literature. Platforms and lenders can use educational level for reference in identifying the default risk of borrowers.

Keywords: Default risk; Online lending; Educational level; Signaling effect (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:92:y:2020:i:c:p:268-276

DOI: 10.1016/j.econmod.2020.01.007

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