Marketplace Lending of SMEs

66 Pages Posted: 20 Feb 2020

See all articles by Doulas J. Cumming

Doulas J. Cumming

Florida Atlantic University - College of Business

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics; Max Planck Institute for Innovation and Competition; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: 2020

Abstract

Peer-to-business lending refers to online platforms facilitating loans from individuals to small and medium-sized enterprises (SMEs). We conjecture that easy-to-understand risk ratings conveyed by the platform play a pronounced role in influencing the borrowing success of SMEs and that more sophisticated financial information and adverse selection are largely absent in these markets. We introduce a dataset of 414 SME marketplace loans and 8,236 online loan days to test these propositions. The data examined provide strong support for the importance of simple platform ratings in influencing investor behavior, while the effect of more detailed financial information is less pronounced.

Keywords: debt crowdfunding, entrepreneurial finance, digital platforms

JEL Classification: G210, G240, G320

Suggested Citation

Cumming, Doulas J. and Hornuf, Lars, Marketplace Lending of SMEs (2020). CESifo Working Paper No. 8100, Available at SSRN: https://ssrn.com/abstract=3541448

Doulas J. Cumming (Contact Author)

Florida Atlantic University - College of Business ( email )

University Tower
220 SE 2 Avenue
Fort Lauderdale, FL 33301
United States

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany
+49 89 20348619 (Phone)

HOME PAGE: http://www.hornuf.com

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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