Household Credit and Regulatory Arbitrage: Evidence from Online Marketplace Lending

Fabio Braggion (), Alberto Manconi () and Haikun Zhu ()
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Fabio Braggion: Finance Department, Tilburg University, Tilburg 5000 LE, Netherlands
Alberto Manconi: Finance Department, Bocconi University, Milan 20136, Italy
Haikun Zhu: Department of Business Economics, Erasmus School of Economics, Erasmus University Rotterdam, Rotterdam 3000D DR, Netherlands

Management Science, 2023, vol. 69, issue 10, 6271-6292

Abstract: We study the relationship between new intermediaries and regulatory arbitrage, analyzing marketplace credit around a tightening of mortgage loan-to-value (LTV) caps in several cities in China in 2013. Using novel data covering over 20% of Chinese marketplace credit as well as the universe of loans and loan applications at a leading online lending platform, we provide evidence consistent with home buyers borrowing online to bypass the tighter LTV cap. Our findings point to new, lightly regulated financial intermediaries as a driver of household leverage, suggesting that they can open nonnegligible regulatory arbitrage channels.

Keywords: online marketplace credit; household leverage; macroprudential regulation; loan-to-value caps; Chinese financial system (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:69:y:2023:i:10:p:6271-6292

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