|
|
|
|
||||
|
||||
Judging Borrowers by the Company They Keep: Friendship Networks and Information Asymmetry in Online Peer-to-Peer LendingMingfeng LinUniversity of Arizona - Eller College of Management Nagpurnanand R. PrabhalaUniversity of Maryland - Robert H. Smith School of Business Siva ViswanathanUniversity of Maryland - Robert H. Smith School of Business July 1, 2011 Western Finance Association 2009 Annual Meeting Paper Abstract: We study the online market for peer-to-peer (P2P) lending, in which individuals bid on unsecured microloans sought by other individual borrowers. Using a large sample of consummated and failed listings from the largest online P2P lending marketplace - Prosper.com, we find that the online friendships of borrowers act as signals of credit quality. Friendships increase the probability of successful funding, lower interest rates on funded loans, and are associated with lower ex-post default rates. The economic effects of friendships show a striking gradation based on the roles and identities of the friends. We discuss the implications of our findings for the disintermediation of financial markets and the design of decentralized electronic markets.
Number of Pages in PDF File: 48 Keywords: peer-to-peer lending, social networks, information asymmetry working papers seriesDate posted: March 9, 2009 ; Last revised: April 30, 2013Suggested CitationContact Information
|
|
|||||||||||||||||||||||||||||||
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
FAQ
Terms of Use
Privacy Policy
Copyright
This page was processed by apollo1 in 0.547 seconds
