P2P Lenders versus Banks: Cream Skimming or Bottom Fishing?

Loan officer incentives, internal rating models and default rates

Calebe de Roure, Loriana Pelizzon () and Anjan Thakor

The Review of Corporate Finance Studies, 2022, vol. 11, issue 2, 213-262

Abstract: We derive three testable predictions from a bank-P2P lender model of competition: (a) P2P lending grows when some banks are faced with exogenously higher regulatory costs; (b) P2P loans are riskier than bank loans; and (c) the risk-adjusted interest rates on P2P loans are lower than those on bank loans. We test these predictions against data on P2P loans and the consumer bank credit market in Germany and find empirical support. Overall, our analysis indicates that P2P lenders are bottom fishing, especially when regulatory shocks create a competitive disadvantage for some banks. (JEL G21)

Date: 2022
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