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Can policy intervention induce a flight to quality: an analysis of the closing of the Chinese P2P market

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  • Lizheng Ma
  • Miao Li
  • Fei Xia

Abstract

In this letter, we study the P2P behavioural finance which addresses an effect of flight to quality under certain policy interventions. We apply the date of loan transactions from a Chinese peer-to-peer (P2P) lending platform and construct a regression discontinuity design to detect the effect of government policy intervention with the closing of the P2P market. We find that strict policy interventions have significant impacts on investors’ behaviours, which lead the investors to downgrade their expectations of the credit levels of the loan. Such impacts on investor behaviour induce a flight-to-quality scenario of the P2P market.

Suggested Citation

  • Lizheng Ma & Miao Li & Fei Xia, 2022. "Can policy intervention induce a flight to quality: an analysis of the closing of the Chinese P2P market," Applied Economics Letters, Taylor & Francis Journals, vol. 29(18), pages 1726-1729, October.
    • Handle: RePEc:taf:apeclt:v:29:y:2022:i:18:p:1726-1729
    DOI: 10.1080/13504851.2021.1959892
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