Politeness matters: The role of polite languages in online peer-to-peer lending

Abstract

Given the limited information for assessing borrowers in online peer-to-peer (P2P) lending, the textual content of loan requests has been recognized as a crucial factor influencing lenders' lending decisions. However, whether politeness, an important but largely neglected linguistic element in loan requests, is related to lenders' decisions remains underexplored. Drawing from signaling theory, this paper seeks to answer two important questions: (1) Is the use of polite language in loan requests related to lenders' decisions? (2) If so, for which types of borrowers or loans is politeness more beneficial? We test our theoretical framework using a sample of 127,044 loan requests from Renrendai, a leading online P2P lending platform in China. Our findings reveal a significant and positive relation between the use of polite language and the likelihood of successful funding. This positive relation is stronger for borrowers with higher credit ratings, higher education levels, as well as for loan requests with lower information richness and higher certainty in language. Our findings suggest that politeness functions as a costless signal that complements costly signals, reducing information asymmetry in P2P lending. This paper bridges the gap between the literature on the role of politeness in individual decision making and information asymmetry in financial markets, providing new insights into the role of language use in P2P lending.