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Nonlinear effects of P2P lending on bank loans in a Panel Smooth Transition Regression model

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  • Zhang, Zan
  • Hu, Wenjun
  • Chang, Tsangyao

Abstract

This paper proposes an original framework to determine the impact of Peer to Peer lending on bank loans. Using a Panel Smooth Transition Regression (PSTR) model, the authors, set P2P lending balances as a threshold variable, average P2P lending rate, short-term benchmark lending rate and M2 as control variables, and established province-specific and time-specific coefficients of variables for 8 provinces of China from January 2014 to April 2016. The results show a nonlinear dynamic relationship between P2P lending balances and domestic bank loan balances: there are two threshold values and three regimes. In regime 1 and regime 2, the P2P lending balances are small, P2P lending balances and average P2P lending rate exert a positive impact on domestic bank loan balances, and short-term benchmark lending rate exerts a negative impact on domestic bank loan balances. In regime 3, P2P lending balances are bigger, P2P lending balances and average P2P lending rate exert a negative impact on the domestic bank loan balances, and the short-term benchmark lending rate exerts a positive impact on domestic bank loan balances. M2 has a positive impact on domestic bank loan balances in three regimes. Therefore, the results explained in this paper have important policy implications towards P2P lending in China.

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  • Zhang, Zan & Hu, Wenjun & Chang, Tsangyao, 2019. "Nonlinear effects of P2P lending on bank loans in a Panel Smooth Transition Regression model," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 468-473.
    • Handle: RePEc:eee:reveco:v:59:y:2019:i:c:p:468-473
    DOI: 10.1016/j.iref.2018.10.010
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    References listed on IDEAS

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    Cited by:

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    6. Sha, Yezhou, 2022. "Rating manipulation and creditworthiness for platform economy: Evidence from peer-to-peer lending," International Review of Financial Analysis, Elsevier, vol. 84(C).
    7. Zhao, Yang & Goodell, John W. & Wang, Yong & Abedin, Mohammad Zoynul, 2023. "Fintech, macroprudential policies and bank risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 87(C).
    8. Qian Wang & Jinbao Yang & Yung‐ho Chiu & Tai‐Yu Lin, 2023. "Cross‐regional comparative study on digital finance and finance efficiency in China: The eastern and non‐eastern areas," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 68-83, January.

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