Is there an effective reputation mechanism in peer-to-peer lending? Evidence from China

Jie Ding, Jinbo Huang, Yong Li and Meichen Meng

Finance Research Letters, 2019, vol. 30, issue C, 208-215

Abstract: Using more than 178,000 borrowing listings in a Chinese online peer-to-peer (P2P) platform, we examine whether there is an effective reputation mechanism in P2P lending. The empirical results indicate that borrowers with better historical performance can obtain loans at a higher probability and lower cost. This indicates that lenders take borrowers’ reputation as a key signal in their lending decisions. Moreover, a good reputation can reduce borrowers’ default probability. We conclude that in P2P lending, there is an effective reputation mechanism that can discipline borrowers’ behavior.

Keywords: Peer-to-peer lending; Reputation mechanism; Asymmetric information (search for similar items in EconPapers)
JEL-codes: G11 G14 G29 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:30:y:2019:i:c:p:208-215

DOI: 10.1016/j.frl.2018.09.015

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