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The Role of Marketplace Lending in Credit Markets: Evidence from Bank Mergers

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  • Panagiotis Avramidis

    (Alba Graduate Business School, The American College of Greece, 11528 Athens, Greece)

  • Nikolaos Mylonopoulos

    (Alba Graduate Business School, The American College of Greece, 11528 Athens, Greece)

  • George G. Pennacchi

    (Department of Finance, University of Illinois, Champaign, Illinois 61820)

Abstract

We develop a model of competition between banks and a marketplace lender to motivate empirical tests using local market data on U.S. banks and the largest marketplace lending platform. Employing mergers of large, multimarket banks as an exogenous credit supply shock, we find that marketplace lending absorbs unmet demand for consumer credit following a decline in the availability of bank credit. Merger-induced bank branch closings lead to an increase in marketplace loan requests and loan acceptance rates, particularly for debt consolidation loans to lower-risk consumers. We also find that marketplace lending mitigates credit distress in local economies affected by mergers.

Suggested Citation

  • Panagiotis Avramidis & Nikolaos Mylonopoulos & George G. Pennacchi, 2022. "The Role of Marketplace Lending in Credit Markets: Evidence from Bank Mergers," Management Science, INFORMS, vol. 68(4), pages 3090-3111, April.
    • Handle: RePEc:inm:ormnsc:v:68:y:2022:i:4:p:3090-3111
    DOI: 10.1287/mnsc.2021.3996
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    References listed on IDEAS

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