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Joint liability loans in online peer-to-peer lending

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  • Zhou, Yimin
  • Wei, Xu

Abstract

This work examines the performance of joint-liability loans, compared with individual loans, in online P2P lending. We show that, with all else being equal, joint-type loans are less likely to default. However, they don’t get lower interest rates. This result suggests that the loan-type (joint-liability or individual), which has the potential to be a source of “soft information”, is not priced in online lending.

Suggested Citation

  • Zhou, Yimin & Wei, Xu, 2020. "Joint liability loans in online peer-to-peer lending," Finance Research Letters, Elsevier, vol. 32(C).
    • Handle: RePEc:eee:finlet:v:32:y:2020:i:c:s154461231830521x
    DOI: 10.1016/j.frl.2018.12.024
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    References listed on IDEAS

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    1. Dean S. Karlan, 2005. "Using Experimental Economics to Measure Social Capital and Predict Financial Decisions," American Economic Review, American Economic Association, vol. 95(5), pages 1688-1699, December.
    2. Zaiyan Wei & Mingfeng Lin, 2017. "Market Mechanisms in Online Peer-to-Peer Lending," Management Science, INFORMS, vol. 63(12), pages 4236-4257, December.
    3. repec:pri:rpdevs:gamespaper.pdf is not listed on IDEAS
    4. Dorfleitner, Gregor & Priberny, Christopher & Schuster, Stephanie & Stoiber, Johannes & Weber, Martina & de Castro, Ivan & Kammler, Julia, 2016. "Description-text related soft information in peer-to-peer lending – Evidence from two leading European platforms," Journal of Banking & Finance, Elsevier, vol. 64(C), pages 169-187.
    5. Christian Ahlin & RobertM. Townsend, 2007. "Using Repayment Data to Test Across Models of Joint Liability Lending," Economic Journal, Royal Economic Society, vol. 117(517), pages 11-51, February.
    6. Mingfeng Lin & Nagpurnanand R. Prabhala & Siva Viswanathan, 2013. "Judging Borrowers by the Company They Keep: Friendship Networks and Information Asymmetry in Online Peer-to-Peer Lending," Management Science, INFORMS, vol. 59(1), pages 17-35, August.
    7. Alessandra Cassar & Bruce Wydick, 2010. "Does social capital matter? Evidence from a five-country group lending experiment," Oxford Economic Papers, Oxford University Press, vol. 62(4), pages 715-739, October.
    8. Wydick, Bruce, 1999. "Can Social Cohesion Be Harnessed to Repair Market Failures? Evidence from Group Lending in Guatemala," Economic Journal, Royal Economic Society, vol. 109(457), pages 463-475, July.
    9. Jefferson Duarte & Stephan Siegel & Lance Young, 2012. "Trust and Credit: The Role of Appearance in Peer-to-peer Lending," The Review of Financial Studies, Society for Financial Studies, vol. 25(8), pages 2455-2484.
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    Cited by:

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    2. Gächter, Ingo & Gächter, Martin, 2021. "Success factors in ICOs: Individual firm characteristics or lucky timing?," Finance Research Letters, Elsevier, vol. 40(C).

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