Risks and Returns in Crowdlending

31 Pages Posted: 26 Mar 2019

See all articles by Saman Adhami

Saman Adhami

Vienna Graduate School of Finance (VGSF)

Gianfranco Gianfrate

EDHEC Business School

Sofia Johan

Florida Atlantic University - Finance; University of Aberdeen; Tilburg Law and Economics Center (TILEC)

Date Written: March 3, 2019

Abstract

Crowdlending has emerged in recent years as an innovative way to finance new ventures and small companies. However, digitalized funding is a new technology itself; therefore, it is prone to mispricing and inefficiencies. We investigate whether peer-to-peer crowdlending to businesses provides investors with returns consistent with the level of risk borne. By studying over 3000 loans mediated on 68 European platforms we show that the returns are inversely related to loans’ riskiness, suggesting that, on average, crowdfunded loans are mispriced. Our results have important implications for the debate about the role of regulation in FinTech.

Keywords: Crowdfunding, Crowdlending, FinTech, Peer-to-Peer Lending, Credit Risks, Innovation Financing, Financial Anomalies

JEL Classification: G24, G32, L26, F23

Suggested Citation

Adhami, Saman and Gianfrate, Gianfranco and Johan, Sofia A., Risks and Returns in Crowdlending (March 3, 2019). Available at SSRN: https://ssrn.com/abstract=3345874 or http://dx.doi.org/10.2139/ssrn.3345874

Saman Adhami

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

Gianfranco Gianfrate (Contact Author)

EDHEC Business School ( email )

58 rue du Port
Lille, 59046
France

Sofia A. Johan

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

University of Aberdeen ( email )

Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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