Journal
SINGAPORE ECONOMIC REVIEW
Volume 65, Issue 2, Pages 419-441Publisher
WORLD SCIENTIFIC PUBL CO PTE LTD
DOI: 10.1142/S0217590818500066
Keywords
Information asymmetry; voluntary information disclosure; verifiable information; online peer-to-peer lending
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Funding
- University of Macau [MYRG2014-00100-FBA]
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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.
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