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Marketplace Lending of SMEs

39 Pages Posted: 9 Jan 2017  

Douglas J. Cumming

York University - Schulich School of Business

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics; Max Planck Institute for Innovation and Competition; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 5, 2017

Abstract

Marketplace lending refers to online platforms facilitating loans from individuals to private small and medium sized enterprises (SMEs). We conjecture that the information conveyed by the platform (ratings) plays a pronounced role in influencing the borrowing success of SMEs, and that more sophisticated financial information and issues of adverse selection are largely irrelevant in these markets. We introduce a first-ever dataset of 414 marketplace loans and track 8,236 online loan-days to test these propositions. The data examined provide strong support for the importance of simple ratings in influencing investor behavior. The data further indicate the importance of competing investment opportunities.

Keywords: Debt Crowdfunding, Entrepreneurial Finance, Internet

JEL Classification: G21, G24, G32

Suggested Citation

Cumming, Douglas J. and Hornuf, Lars, Marketplace Lending of SMEs (January 5, 2017). Available at SSRN: https://ssrn.com/abstract=2894574 or http://dx.doi.org/10.2139/ssrn.2894574

Douglas Cumming

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Lars Hornuf (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany
+49 89 20348619 (Phone)

HOME PAGE: http://www.hornuf.com

Max Planck Institute for Innovation and Competition

Marstallplatz 1
Munich, 80539
Germany

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