VOLUNTARY VERIFIABLE INFORMATION DISCLOSURE AND LOAN FUNDING PERFORMANCE: EVIDENCE FROM PAIPAIDAI IN CHINA

Ying Li (), Jacky So and Jia Yuan ()
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Ying Li: Department of Accounting and Finance, Macau University of Science and Technology, Macau
Jacky So: #x2020;Department of Finance and Business Economics, University of Macau, Macau
Jia Yuan: #x2020;Department of Finance and Business Economics, University of Macau, Macau

The Singapore Economic Review (SER), 2020, vol. 65, issue 02, 419-441

Abstract: We investigate what mechanism helps to motivate the willingness of Chinese people to lend money to strangers online in the peer-to-peer (P2P) lending market. We argue that the voluntary verifiable information disclosure created by Chinese P2P practitioners helps to mitigate the asymmetric information problem and facilitates lending transactions between lenders and borrowers. We exploit a unique individual level data set obtained from Paipaidai, a leading Chinese P2P company, and evaluate the extent that the voluntary verifiable information disclosure helps to ease adverse selection problems. We find that information disclosure does increase the probability that a loan listing will be successfully funded by around 10% on average. We also find that the voluntary verifiable information disclosure helps to decrease the equilibrium interest rate by around 0.2% on average.

Keywords: Information asymmetry; voluntary information disclosure; verifiable information; online peer-to-peer lending (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S0217590818500066

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