Abstract
Previous studies indicate that individuals’ default behaviors on online peer-to-peer (P2P) lending platforms greatly influence other borrowers’ default intentions. However, the mechanism of this impact is not clear. Moreover, there is scarce research in regard to which factors influence the relationship between an individual’s default behavior and an observer’s default intention. These important questions are yet to be resolved; hence, we conducted two experiments using the scenario-based research method, focusing on Chinese online P2P lending platforms. Our results indicate that an individual’s default behavior can trigger an observer’s default intention as a result of the imperfect punitive measures as they currently exist on Chinese online P2P lending platforms. Both the observer’s moral disengagement level and pragmatic self-activation level serve as mediating variables. In situations where an observer knows an individual’s default behavior, the level of intimacy between the defaulter and observer positively affects the relationship between their default behavior and intention. The intimacy level also positively influences the relationship between the individual’s default behavior and the two mediator variables. Based on the findings, we provide management suggestions in the context of online P2P lending. Our study sets a foundation for future research to utilize other methods to extend the present research findings to other regions and domains.
Highlights
The subprime mortgage crisis that arose from borrowers in the U.S defaulting on their home loans triggered the global financial crisis
Based on the theory of planned behavior (TPB), we explore what variables play a role in the relationship between individual default behaviors and observer default intentions
To further explore how and when an observer’s default intention is influenced by a P2P lending individual’s default behavior, the present study aims to examine which variables influence the relationship between individual default behavior and observer default intention
Summary
The subprime mortgage crisis that arose from borrowers in the U.S defaulting on their home loans triggered the global financial crisis. Online peer-to-peer (P2P) lending has newly emerged in financial markets, providing a convenient way for individuals and small businesses to access financial channels on the Internet This specific type of financial market allows for borrowers and lenders to directly interact online without banks, other financial institutions, and/ or collateral (Lin et al 2009; Collier and Hampshire 2010). Trades without collateral and traditional financial intermediates distinguish online P2P lending platforms from traditional financial credit markets (Lee and Lee 2012) This difference makes the online P2P lending market inherently risky due to the lack of repayment guarantees and an information asymmetry between borrowers and lenders (Wang et al 2020). There has been a lack of research on the underlying mechanism of this impact
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have