Policy Uncertainty and Household Credit Access: Evidence from Peer-to-Peer Crowdfunding

52 Pages Posted: 8 Dec 2017 Last revised: 20 Mar 2018

See all articles by Xiang Li

Xiang Li

Tsinghua University - PBC School of Finance

Bibo Liu

Tsinghua University

Xuan Tian

Tsinghua University - PBC School of Finance

Date Written: March 15, 2018

Abstract

This paper studies how policy uncertainty affects household credit access. Using crowdfunding data from a major peer-to-peer (P2P) crowdfunding platform, Prosper.com, and a news-based policy uncertainty index developed by Baker, Bloom, and Baker (2016), we find that policy uncertainty negatively affects households’ access to small loans. Using an instrument variable approach and the difference-in-differences approach relying on plausibly exogenous variation in policy uncertainty generated by gubernatorial elections, we show that the relation is likely causal. Investors’ increased caution on deal selection and enhanced value of the “wait-and-see” option appear two plausible underlying channels through which policy uncertainty affects P2P crowdfunding. Further evidence suggests that policy uncertainty decreases households’ incentives to borrow at the aggregate level, and increases loan interest rates and default probabilities.

Keywords: Policy Uncertainty; Credit Access; Peer-to-Peer Crowdfunding

JEL Classification: G18; G21; D14

Suggested Citation

Li, Xiang and Liu, Bibo and Tian, Xuan, Policy Uncertainty and Household Credit Access: Evidence from Peer-to-Peer Crowdfunding (March 15, 2018). Available at SSRN: https://ssrn.com/abstract=3084388 or http://dx.doi.org/10.2139/ssrn.3084388

Xiang Li

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Bibo Liu

Tsinghua University ( email )

Beijing, Beijing 100083
China
86-10-62795701 (Phone)

Xuan Tian (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

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