Heterogeneous Social network shape ability and willingness of rural residents to repay loans in China

Qinghai Li, Yangcheng Yu, Yanru Li and Guanglin Sun

Research in International Business and Finance, 2023, vol. 65, issue C

Abstract: This paper studies the impact and mechanism of heterogeneous social networks on credit repayment ability and willingness among Chinese rural residents. Based on the biprobit model with partial observability, we find a complementary relationship between repayment willingness and ability, and the heterogeneous social network effect differs with its nature. For repayment ability, bridging and bridged-linking social networks have positive effects whereas bonding and bond-linking social networks have insignificant effects. For repayment willingness, bonding and bond-linking social networks have positive effects whereas bridging and bridged-linking social networks have insignificant effect. Exploring mechanisms suggest that heterogeneous social networks affect repayment ability by alleviating income uncertainty, enhancing resident assets, and sharing risks; they shape repayment willingness through supervision, reputation, and punishment. Finally, the promoting effect of bonding and bond-linking networks on repayment willingness is enhanced by the construction of formal credit systems and the improvement of the informal credit climate.

Keywords: Rural Chinese residents; Credit repayment performance; Repayment ability; Repayment willingness; Biprobit model with partial observability (search for similar items in EconPapers)
JEL-codes: D14 Q12 Q14 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:65:y:2023:i:c:s0275531923000971

DOI: 10.1016/j.ribaf.2023.101971

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