Does borrowers' impatience disclose their hidden information about default risk?

Daniel Kraus

No 132, Thuenen-Series of Applied Economic Theory from University of Rostock, Institute of Economics

Abstract: This chapter provides new evidence on borrowers' hidden information about their riskiness and its link to their impatience. To do so, I analyze consumer loans on the German platform Smava, which has a unique peer-to-peer lending process. Observationally identical but unobservably riskier borrowers offer investors a higher interest rate. This helps them to obtain their loan faster and with a higher probability. Very impatient borrowers who use Smava's instant loan service pay a higher interest rate and have a higher default risk than less impatient borrowers. These findings suggest that borrowers' impatience can be used to screen their riskiness.

Keywords: Asymmetric Information; Financial Intermediation; Consumer loans; Patience (search for similar items in EconPapers)
JEL-codes: D82 G21 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:roswps:132

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