Crowdlending Behaviors in the Aftermath of a Crisis: Evidence From a Natural Experiment

Production and Operations Management, Forthcoming

41 Pages Posted: 27 Jan 2021 Last revised: 13 Oct 2023

See all articles by Zhiyi Wang

Zhiyi Wang

University of Colorado at Boulder - Leeds School of Business

Lusi Yang

Georgia State University - J. Mack Robinson College of Business

Varun Karamshetty

School of Computing, National University of Singapore

Jungpil Hahn

National University of Singapore (NUS) - Department of Information Systems and Analytics

Date Written: April 30, 2019

Abstract

Natural disasters and disease outbreaks cause substantial social turbulence and economic damage. The survival and continued operation of local small businesses and entrepreneurs are critical to the development activities in post-disaster recovery. However, these small businesses and entrepreneurs face greater challenges in accessing funding through traditional channels during a crisis. Crowdlending, also known as peer-to-peer (P2P) microfinancing, has been successfully used to bypass traditional channels and raise funds directly from crowd lenders. But it is unclear if such platforms can also be effectively used in the aftermath of crises, given that disasters induce both prosocial motivations and risk considerations in lender responses. To understand the operational implications of crowdlending for small businesses, we examine how crowd lenders respond to loan requests during a crisis and what factors moderate their responses. Drawing on the literature on disaster management and crowdlending, we hypothesize that lenders respond positively to loan requests from crisis-affected areas, and such responses are moderated by fundraising objectives and the lender’s national culture. With observational data from an influential crowdlending platform and the 2014 Ebola outbreak as the treatment in a natural experiment design, we find that, on average, lenders respond positively to loan requests from crisis-affected areas, and they tend to favor loan requests emphasizing economic rather than social objectives. Furthermore, lenders from collectivistic cultures are more likely to respond positively during a crisis than lenders from individualistic ones. Our study contributes to research and practice in disaster management, particularly small business operations management during crises, by showing that crowdlending can be a useful fundraising channel for small businesses, which is meaningful for post-disaster economic development and recovery. We also offer implications for the recent conversation on the COVID-19 pandemic by analyzing and discussing the similarities and differences between the Ebola outbreak and the Covid pandemic.

Keywords: Disaster Management, Online Crowdlending, Prosocial Motivation, Risk Consideration, Fundraising Objectives, National Culture

Suggested Citation

Wang, Zhiyi and Yang, Lusi and Karamshetty, Varun and Hahn, Jungpil, Crowdlending Behaviors in the Aftermath of a Crisis: Evidence From a Natural Experiment (April 30, 2019). Production and Operations Management, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3739260 or http://dx.doi.org/10.2139/ssrn.3739260

Zhiyi Wang

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Lusi Yang (Contact Author)

Georgia State University - J. Mack Robinson College of Business ( email )

P.O. Box 4050
Atlanta, GA 30303-3083
United States

Varun Karamshetty

School of Computing, National University of Singapore ( email )

Singapore

HOME PAGE: http://https://www.comp.nus.edu.sg/disa/bio/varunk/

Jungpil Hahn

National University of Singapore (NUS) - Department of Information Systems and Analytics ( email )

Singapore

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