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Characteristics and mechanisms of not-fully marketized interest rates: Evidence from Chinese online lending

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  • Chen, Rongda
  • Chen, Yikai
  • Jin, Chenglu
  • Xu, Guorui
  • Bao, Weiwei
  • Guo, Kenan

Abstract

Most of the online lending rate are predominately determined by the platform, especially in the Chinese online lending markets, which indicates that the online lending rate is “not-fully marketized”. Based on a sample of 20 representative online lending platforms with daily data during June 1, 2017 to May 31, 2018 collected from Net credit eye and Lingyicaijing, our results, first, show that the average duration of loans, pending balance, newly added investors, and relative repayment amount are all significant factors for online lending rates. Second, from the view of the whole industry, the increase of the new investors also attracts more risk-seeking investors enter into the industry, who have considerable influences on online lending rates. Finally, when considering the credit rating of each individual platform, the explanatory power of the above factors is gradually weakened as the platform rating declines. This interesting finding suggests that the online lending rate of any platform can reasonably reflect its risks if the platforms keep better regulatory compliance. Our results provide theoretical and empirical supports for both regulators and investors.

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  • Chen, Rongda & Chen, Yikai & Jin, Chenglu & Xu, Guorui & Bao, Weiwei & Guo, Kenan, 2021. "Characteristics and mechanisms of not-fully marketized interest rates: Evidence from Chinese online lending," Research in International Business and Finance, Elsevier, vol. 55(C).
    • Handle: RePEc:eee:riibaf:v:55:y:2021:i:c:s0275531920309405
    DOI: 10.1016/j.ribaf.2020.101333
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