The Failures of Peer-to-Peer Lending Platform Finance and Politics

59 Pages Posted: 18 Mar 2020 Last revised: 12 May 2020

See all articles by Qing He

Qing He

Renmin University of China

Xiaoyang Li

The Chinese University of Hong Kong (CUHK)

Date Written: May 12, 2020

Abstract

We investigate the influence of financial and political factors on Peer-to-Peer (P2P) platform failures in the online lending market in China. Using a competing risk model for platform survival, we show that large platforms, platforms having listed firms as large shareholders and platforms with better information disclosure are less likely to go bankruptcy or run off with investors’ funds. More importantly, falling platforms are much less likely to run off in advance of important political events, but more likely to go bankruptcy or run off after these events. These effects are more pronounced, among platforms that are more politically connected, and platforms operating in provinces where local officials have close central-local political ties, and when there is a better local financial condition. Our study highlights the role of political incentives on government regulatory intervention of platform failures.

Keywords: P2P platform failure, political interference, political connection, financial performance

JEL Classification: G33, G21, G23, P26

Suggested Citation

He, Qing and Li, Xiaoyang, The Failures of Peer-to-Peer Lending Platform Finance and Politics (May 12, 2020). Available at SSRN: https://ssrn.com/abstract=3542616 or http://dx.doi.org/10.2139/ssrn.3542616

Qing He

Renmin University of China ( email )

Room 705
Mingde main building
Beijing, Beijing 100872
China

Xiaoyang Li (Contact Author)

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong

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