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The influence of regional sentiment on online borrowing

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  • Bazley, William
  • Jannati, Sima

Abstract

Innovations in financial technology have broadened individuals’ access to unsecured personal loans. Drawing on insights from consumer behavior research linking negative emotions to credit-financed consumption, we demonstrate that transitory emotions impact the aggregate use of online loans in a region. Specifically, an increase in households’ lack of positive emotion in a Metropolitan Statistical Area (MSA) is associated with higher demand for loans in that area. However, this emotion-driven borrowing is associated with a lower likelihood of repayment. Moreover, we find that transient emotions do not affect the use of debt provided by traditional credit suppliers. Our evidence underscores the heterogeneous implications of negative sentiment for borrowing behavior, contingent on the convenience of the debt source.

Suggested Citation

  • Bazley, William & Jannati, Sima, 2024. "The influence of regional sentiment on online borrowing," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    • Handle: RePEc:eee:finana:v:95:y:2024:i:pb:s1057521924003557
    DOI: 10.1016/j.irfa.2024.103423
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    More about this item

    Keywords

    Emotions; Negative sentiment; Financial technology; Peer-to-peer credit;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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