The Impact of IPOs on Peer-to-Peer Lending Platforms
39 Pages Posted: 17 Dec 2018 Last revised: 21 Apr 2020
Date Written: November 1, 2018
Peer-to-peer lending platforms have become commonplace for individuals and small firms interested in borrowing capital. Our analysis is based on two large peer-to-peer lending online platforms, which we refer to as P_1 and P_2. We are facing an interesting situation where P_1 went public by filing an initial public offering (IPO), while P_2 remained privately held. Using large loans data from both platforms, we exploit this empirical environment to carefully infer the impact of IPOs on peer-to-peer lending platforms. Did P_1 alter its decisions by accepting different types of loans or by softening its requirements? Or, on the contrary, did its decisions become stricter given the increased level of scrutiny? To answer these questions, we use several econometric tools, including sample selection bias correction, propensity score matching, and synthetic control. We present rigorous empirical analyses at four time events: first IPO rumor, filing date, actual IPO, and quarterly report release. We find that several performance metrics were indeed affected by the IPO filing. Specifically, we observe that (i) the loans' performance (default rate and return) decreased, (ii) borrowers' requirements (credit score and annual income) diminished, and (iii) the acceptance rate inflated.
Keywords: Peer-to-peer lending, initial public offering, synthetic control
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