Homophilous intensity in the online lending market: Bidding behavior and economic effects

Jianwen Li, Bo Zhang, Mingming Jiang and Jinyan Hu

Journal of Banking & Finance, 2023, vol. 152, issue C

Abstract: Using transaction-level data from a large online lending marketplace, we explore the role of homophilous intensity in online lending and uncover the evidence of a significant impact of homophily on the bidding behavior and economic effects of both lenders and borrowers. Lenders are more likely to invest in borrowers with more homophilous traits, and homophily induces higher bidding amounts. Moreover, lenders charge lower prices to more homophilous borrowers, but are able to earn higher returns due to better repayment from these borrowers. Our findings suggest that homophilous intensity has a statistically and economically significant effect on both borrowers and lenders in the online lending environment.

Keywords: Homophilous intensity; Online lending; Bidding behavior; Economic effects (search for similar items in EconPapers)
JEL-codes: D91 G11 G21 G41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:152:y:2023:i:c:s0378426623001000

DOI: 10.1016/j.jbankfin.2023.106876

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