Anti-Corruption Reforms and Microfinancing: Evidence from Households' Fintech Borrowing
48 Pages Posted: 2 Dec 2019 Last revised: 19 Jan 2020
Date Written: January 11, 2020
Despite a surging literature investigating the impacts of anti-corruption policies from firms’ perspective, it is still unclear whether and how such policies would affect households’ microloans. Further, it is theoretically ambiguous whether anti-corruption movements would promote or inhibit personal debts. In this paper, we empirically analyse the effects of China’s recent anti-corruption campaign on households’ Fintech borrowing using a transaction level data in a large Chinese online peer-to-peer (P2P) lending market. We employ a Difference-in-Differences (DID) estimation strategy and investigate two exogenous shocks regarding the movement: the 2012’s Eight Point Policy announcement and multiple rounds of the Central Inspection Team Campaigns in 2013 and 2014. Our results show that P2P participants pertaining to SOEs and government agencies increase their Fin-tech borrowings significantly in the wake of the both events, which echoes the consumption smoothing hypothesis. We find that government or SOEs debtors with high probability of current income reduction (proxied by their ages or salary level) tend to borrow even more, showing an optimistic view toward their future incomes. Furthermore, we document a series of lenders’ risk adverse and sharing behaviours. However, we do not find convincing evidences that government agency and SOEs employees have a hard time raising funds through Fintech channel due to the campaign. Overall, this paper contributes to the anti-corruption literature by highlighting the role of Fintech lending market played for household consumption smoothing and complements the P2P lending literature by demonstrating the importance of online borrowers’ occupations.
Keywords: Peer-to-Peer Crowdfunding; Corruption; Household Debt
JEL Classification: D14, D73, G51
Suggested Citation: Suggested Citation