39 Pages Posted: 9 Jan 2017
Date Written: January 5, 2017
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: Suggested Citation
Cumming, Douglas J. and Hornuf, Lars, Marketplace Lending of SMEs (January 5, 2017). Available at SSRN: https://ssrn.com/abstract=2894574