Platform Characteristics and Online Peer-to-Peer Lending: Evidence from China

Abstract

In consideration of information asymmetry, this paper focuses on the impact of platform information on online P2P lending transactions and borrower and lender behavior to understand the role of P2P platforms. Using P2P platform data in China, we obtain the following findings. 1) Platforms with good attributes are more attractive to lenders11These good attributes are venture capital background, larger registered capital, longer operating time, good rank and active trading., while borrowers tend to seek small and new platforms, ceteris paribus; lenders care more about investment safety than investment return. 2) The most important factor for both borrowers and lenders is the number of counterparties, so positive externality is in effect. 3) Lenders have a greater impact on borrowers than do borrowers on lenders. In addition, lenders are most concerned about platforms; hence, platforms should consider attracting investors their priority. 4) While essentially decided by the supply and demand of funds, interest rate can be adjusted by platform characteristics. In addition to the pure supply-and-demand effect, a negative scale effect and a negative background effect are confirmed22We refer to this pure correlation between trading volume, different types of shareholder backgrounds and the interest rate as scale effect and background effect, respectively.. 5) There is an inverted U-shaped relationship between the average interest rate and the number of investors, and no quadratic effect on the borrower side is found.