Social Capital, Trusting, and Trustworthiness: Evidence from Peer-to-peer Lending
Journal of Financial and Quantitative Analysis, Forthcoming
61 Pages Posted: 27 Jan 2021
Date Written: November 19, 2020
How does social capital affect trust? Evidence from a Chinese peer-to-peer lending platform shows regional social capital affects the trustee’s trustworthiness and the trustor’s trust propensity. Ceteris paribus, borrowers from higher social capital regions receive larger bid from individual lenders, have higher funding success, larger loan size, and lower default rates, especially for low-quality borrowers. Lenders from higher social capital regions take higher risks and have higher default rates, especially for inexperienced lenders. Cross-regional transactions are most (least) likely to be realized between parties from high (low) social capital regions.
Keywords: Social Capital, Trustworthiness, Generalized Trust, Debt Crowdfunding
JEL Classification: Z10, G10, O16
Suggested Citation: Suggested Citation