Business Friendliness: A Double-Edged Sword

In this paper, we test the hypothesis that business-friendly local-government policies combined with weak legal institutions lead to lower economic welfare in the form of greater fraud activity. Using data of almost 3000 failed peer-to-peer (P2P) lending platforms in China, labeled as runaways, we find that they are more prevalent in provinces with business-friendly policies with weak law-enforcement regimes.

Automated summary

The study finds that business-friendly local-government policies combined with weak legal institutions lead to higher prevalence of fraud activities, as evidenced by the number of failed P2P lending platforms in China.