Abstract

http://ssrn.com/abstract=1650617
 
 

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Do Local Capital Market Conditions Affect Consumers' Borrowing Decisions?


Alexander W. Butler


Rice University - Jesse H. Jones Graduate School of Business

Jess Cornaggia


Georgetown University

Umit G. Gurun


University of Texas at Dallas - Naveen Jindal School of Management

March 19, 2013


Abstract:     
Studying consumer financing decisions is difficult because of endogeneity problems and scarce data. We use new data and an exogenous change in an interest rate ceiling facing consumers seeking loans from an online peer-to-peer lending intermediary to test how access to finance affects consumers’ borrowing decisions. A differences-in-differences approach reveals that good access to local bank finance causes consumers who seek peer-to-peer loans to do so at lower interest rates. We find that local finance plays a larger role in how consumers seek loans than local economic conditions like per capita income. Our results are particularly strong for borrowers with poor credit and those seeking small loans.

Number of Pages in PDF File: 54

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Date posted: July 29, 2010 ; Last revised: June 21, 2013

Suggested Citation

Butler, Alexander W. and Cornaggia, Jess and Gurun, Umit G., Do Local Capital Market Conditions Affect Consumers' Borrowing Decisions? (March 19, 2013). Available at SSRN: http://ssrn.com/abstract=1650617 or http://dx.doi.org/10.2139/ssrn.1650617

Contact Information

Alexander W. Butler
Rice University - Jesse H. Jones Graduate School of Business ( email )
MS 531
Houston, TX 77005
United States
713-348-6341 (Phone)
HOME PAGE: http://www.owlnet.rice.edu/~awbutler/
Jess Cornaggia (Contact Author)
Georgetown University ( email )
3700 O Street, NW
Washington, DC 20057
United States
HOME PAGE: http://www.jesscornaggia.com
Umit G. Gurun
University of Texas at Dallas - Naveen Jindal School of Management ( email )
P.O. Box 830688
Richardson, TX 75083-0688
United States
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