Why individuals invested in China’s P2P lending market: an explanation based on categorization theory

Ye Liu, Yufeng Wang, Haohua Li and Zhi Zhou

Applied Economics, 2025, vol. 57, issue 4, 448-452

Abstract: This paper examines why individuals invested in the nascent and underregulated Chinese P2P lending market based on the categorization theory in marketing studies. Using a unique account-level database of investors from a large P2P platform, we find that investors from regions with better-developed FinTech products that involve financial intermediaries invested more and took more risks in P2P lending. The effect is stronger among investors with a lower level of generalized trust or less investment experience in P2P lending. Our results suggest that category-based evaluation may occur when individuals decide whether to invest in a new risky financial market.

Date: 2025
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DOI: 10.1080/00036846.2024.2305153

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